End Of The 99p Download?

One of the upshots of UK Chancellor George Osborne’s March 19 budget could result in the end of the 99-pence download.

Osborne is plugging a VAT loophole that allows internet companies to avoid paying the tax at the British rate of 20 percent by instead paying it in countries such as Luxembourg, where the tax rate is as low as 3 percent.

He’s bringing in new laws that’ll become effective Jan. 1 to make sure Internet downloads are taxed in the country of purchase.

Web firms such as Amazon and Apple will then have to charge the UK’s 20 percent VAT rate.

The online retailers are expected to pass the increased tax cost on to the purchaser, thereby raising the cost of a download to more than £1, while the treasury coffers are estimated to benefit by about £300 million ($494 million) per year.

Research by Greenwich Consulting has suggested Britain could have financed the Olympic Games from the potential VAT on digital sales between 2008 and 2014.

In 2012 it found that the UK was missing out on more than £1.6 billion ($2.75 billion) in VAT on digital services.