Why £0.79 is the new £0.69 on Apple's App Store

http://www.theguardian.com/technology/2015/jan/09/apples-app-store-prices-europe

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The starting price of apps on Apple’s App Store has increased by up to 15% overnight, after the company raised prices to account for tax and foreign exchange changes.

On the British App Store, the new starting price for non-free apps has risen by 15% to £0.79. But the price rises aren’t uniform: the next tier has remained static at £1.49, while the tier after that has also increased by 15%, from £1.99 to £2.29.

Apple told the Guardian that “Prices on the App Store are changing to account for adjustments in value-added tax (VAT) rates and foreign exchange rates.”

The new prices increase an already large disparity between the cost of software in Britain and the US. A $0.99 app now retails in the UK for £0.79, which is $1.19 at current exchange rates, although the US list price is exclusive of tax which ranges from 0% to 7.5%. The price rises also filter through to organisations using in-app purchases to sell digital media, such as the Marvel comics app.

Prices rose across the European Union, in part to reflect new regulations in the EU which require online sellers to charge VAT based on their customer’s location, rather than their own. With Apple’s nominal European headquarters located in the low-tax jurisdiction of Luxembourg, the amount of VAT it owes has gone up in most EU countries.

That regulation came into place on 1 January, but until now the extra tax had been paid out of the developers’ share of the revenue, rather than being passed on to consumers.

As well as the EU price rises, Apple also dropped prices in Iceland and “changed” them in Russia, with some rising and some falling. Both countries have seen interest rates fluctuate in relation to the US dollar in recent years.

The last price rise on the UK App Store was in 2011, when the base price rose by 10p to £0.69. The store is somewhat unusual in allowing developers to set their own prices, but only from a pre-set collection of tiers, rising in roughly dollar increments. That allows Apple to maintain uniform pricing for apps across national borders.

It’s related to the controversial VAT Mini One Stop Shop (MOSS) regulations introduced by HMRC, which have seen many small online retailers struggling and ultimately closing due to their inability to comply with the new rules. Small businesses were granted a six-month grace period, but ultimately many worry that the requirements will still prove impossible to follow.

“Where before the tax laws offered sole traders, micro-businesses, and hobbyists a clear run-up and a way to grow easily, now it’s erected an obstacle course that will stop many even opening up,” Megan Kerr, a writer, told the Guardian this week. “And others, like me, risk suffocating silently, strangled by regulations we can’t keep up with.”

• Developers made $10bn from iOS apps in 2014