On 1 April, South Africans can look forward to paying more for their online purchases, with VAT of 14% being applied to sales of digital goods and services bought online, which includes subscription services to games and things like Playstation Plus and Xbox Live Gold as well as things like distance learning, streaming services and online payment portals like Paypal. But we’re not the only ones who have to deal with this new surprise – Britain now has plans to do exactly the same thing, threatening the revenues of companies local and international who sell their goods online in the country. A VAT of 20% will be imposed on all sales of digital goods from January 2015 by the British government.
In the UK, companies such as Apple, Amazon and Netflix are able to sell their digital goods and services to consumers at a very low rate thanks to a 3% VAT rate which was previously piled on. This meant that Apple’s music sales could be put at 99p for single tracks, making it easier for consumers to dive into buying music through iTunes because it was always less than a Pound in the store. For some reason, humans still perceive the difference between 1.00 and 0.99 as being pretty big and psychological pricing is still relied on in many stores and markets to attract people to spend more than they planned.
Come January 2015, though, consumers will be footing the bill for the extra VAT, which turns those 99p purchases up into the £1.20 region. Chancellor of the Exchequer, George Osborne, believes that the added VAT will bring in some £300 million into the country’s coffers. “Public tolerance for those who do not pay their fair share evaporated long ago,” said Osborne in his Budget speech.
The move affects a ton of businesses operating from within and outside the UK through the Internet. Out of 34,000 businesses affected by the policy, approximately 5,000 of those are not VAT vendors in the UK. As is the case for South Africa, it is expected that banks in the UK will assist in adding the VAT charges to purchases made from companies who aren’t VAT-registered with the UK government.
In the meantime, 1 April is just a week away. Are you preparing for the extra charges? Are any gamers dropping their online subscriptions to save money? Let us know in the comments below and in our forums.