At the moment, companies like Apple and Amazon are allowed to sell digital downloads in the UK at a much lower tax rate than that of CDs and DVD’s, this could change in the future.
There is not VAT payable on digital downloads, instead, these companies sell their digital downloads through Luxembourg, the tax rate there can be as low as 3 percent.
Now according to a recent report by The Guardian, the UK government is looking to change the tax on digital downloads, and the may be subject to VAT of 20 percent in the future.
This could put and end to songs retailing for 99p, and companies like Apple and Amazon will have to charge 20 percent VAT on all digital downloads in the UK from 2015.
This will put the price up of music, movies and also book downloads in the UK, and it is expected to raise an extra £300 million a year in VAT.
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