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Apple App Store prices to increase reflecting 2% Equalisation Levy

Apple announced on Monday that prices of App Store products in India will increase to reflect a 2% equalisation levy, in addition to the 18% GST already being imposed. This will apply to prices of apps and in-app purchases, excluding auto-renewable subscriptions. India’s 2% digital tax on foreign e-commerce operators kicked in from April 2020.

Prices will also change in other countries in response due to fluctuations in exchange rates of local currencies. Prices in Brazil, Colombia, Russia, and South Africa will be increased in the next few days due to changing forex rates. In Indonesia, a new 10% VAT will be charged to foreign developers. Prices will also change in Iceland and Albania to align with pricing used in other markets selling in US dollars with VAT. 

In the past months, Big Tech companies said that they will pass on the additional tax burdens in Europe onto their customers. Apple began charging developers with increased levies on their revenues in different countries in Europe: 2% in UK, 3% in Italy and France. In Turkey, prices of apps and in-app purchases will increase due to a digital tax of 7.5%. 

Google will also begin charging new levies on advertising in UK, Austria, and Turkey. Even Amazon said it will no longer absorb the digital services tax since discussions with the UK government have ended and the tax has come into effect. 

OECD warns of unilateral taxes without agreement on digital tax

Earlier this month, the OECD warned that disagreement over global digital taxes may result in unilateral taxes and increased trade disputes, triggering a global trade war that could potentially shave off 1% of the global GDP annually. The Organisation for Economic Co-operation and Development (OECD) has been spearheading negotiations between 137 countries to solve the question of a global digital tax framework since 2019. Faltering negotiations and a tussle with the US led to several countries going ahead with their own individual taxes. For instance, France’s 3% DST was a placeholder since OECD negotiations were expected to result in a global framework.

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The US had suspended negotiations with European countries on a digital tax, and threatened them with retaliation and tariffs cif they continued with taxing technology companies, the largest of which are American. Eventually, France, UK, Spain, and Italy offered to limit the scope of their proposed taxes.

Earlier this year, Indonesia implemented both direct (income tax) and indirect taxes (VAT) on foreign sellers, service providers, and foreign e-commerce companies that earn revenue from digital transactions made by Indonesian consumers. These taxes were spurred on by the COVID-19 pandemic. Malaysia began imposing a 6% service tax on imported digital services starting January 1, 2020.

Read more: Indo-US trade deal ready to sign, non-tariff trade barriers need to be removed: Piyush Goyal

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