AN ELEMENT of the UK budget could sound the death knell for low-cost digital downloads in the UK.
The UK budget was presented last week, and buried away it includes plans to make companies charge a 20 percent tax on digital downloads.
That is a bit higher than the reported three percent rate that some companies pay in their 'native' Luxemburg, and is expected to have a dramatic impact on tax revenues and the content industry.
"As announced at budget 2013, the government will legislate to change the rules for the taxation of intra-EU business to consumer supplies of telecommunications, broadcasting and e-services," read the document, as reported by the Guardian.
"From 1 January 2015 these services will be taxed in the member state in which the consumer is located, ensuring these are taxed fairly and helping to protect revenue."
The newspaper reported that the tax rule could be in place by new year next year, and that government estimates project that it could raise an additional £300m per year for the UK Treasury.
The Guardian said that a report from Greenwich Consulting reckoned that UK businesses are losing £1.6bn a year in possible digital VAT revenues. That study, which was covered by the Guardian at the end of last year, estimated that lost taxes could have funded the 2012 Olympics.
We checked, and the standard VAT in Luxembourg is 15 percent, however, it varies between that high mark and the lowest rate of three percent for items including ebooks, copyright and children's shoes.
Other VAT brackets include a six percent rate, which is levied on heating and hairdressing, and a 12 percent rate that covers printed material and some booze. µ