In response to UK's “digital services tax”, Apple says it will raise UK developer fees by 2% and Amazon says it will increase third-party seller fees by 2%
Developers, ad buyers, and third-party sellers are all affected — For many years, Europe has been unhappy with the tax habits of US tech giants.
The VergeJames Vincent
Context & Ripple Effects
The UK's 2% digital services tax was announced back when the chancellor set it at 2% for profitable tech companies over £500M global revenue (effective April 2020), following an earlier push to tax offshore-held earnings widely read as aimed at tech firms. This article is the moment the tax lands: Apple and Amazon both respond by adding exactly 2% to what UK customers of their marketplaces pay.
The move follows a script Amazon has already run once — it blamed France's digital tax when it raised French SMB seller fees by 3% the year before. The pattern matters because a tax levied on gross platform revenue is being recovered through gross fees, meaning the incidence falls on UK developers and third-party sellers rather than on Apple's or Amazon's own margins.
First-order effects
UK App Store developers see their cut of sales shrink by 2 percentage points overnight, while Amazon's UK third-party sellers face an equivalent fee increase — the description notes ad buyers are caught too.
Second-order effects
Each new national digital tax now triggers a localized pass-through from the platforms, as Amazon's France precedent shows, so governments pursuing DSTs effectively tax their own small-business ecosystems unless they forbid the practice.
Third-order effects
If platforms reliably convert DSTs into line-item fees, the taxes fail to reach the giants' profits they target — a weakness visible later when the UK weighs reducing or scrapping the 2% levy under US tariff pressure, after it had raised nearly £360M in its first year per the National Audit Office (NAO findings).
The trend: Digital services taxes are colliding with platform economics: gatekeepers pass the gross-revenue levy straight through to developers and sellers, hollowing out the tax's intended incidence.
Apple is making App Store developers swallow the controversial new digital services taxes in the UK and France, per email to iOS devs today. Despite most headlines describing them as a tax on “Big Tech”, it's the little guys that end up paying. https://twitter.com/...
Is the problem as much with the digital service tax design as Apple or other tech companies? probably. but if you try to brand something the GAFA tax and GAFA ends up paying less than the companies that use their platforms, something seems awry.
HMRC says the UK's DST is aimed at companies that “provide a social media service, search engine or an online marketplace to UK users” with global sales of more than £500m and above £25m in UK. Most developers selling through the App Store do not meet those criteria.
A few followups to this: the digital tax is levied on the retail price before the App Store revenue split. So in effect, Apple bears 30% of the tax and developers 70%. Apple may end up paying more in aggregate than any one dev but a small biz will feel it more than a $2tn co.
FT: “Google is to pass on the cost of digital services taxes in Europe to advertisers, complicating the most recent attempts by governments to capture a bigger slice of the US tech group's revenues.” https://www.ft.com/...
The decision of Google and Amazon to pass the cost of digital services taxes on to advertisers and third-party sellers is a case in point for the market and political power of online platforms. A thread. 1/n https://giftarticle.ft.com/...
Remind me, what's the point of the digital tax? To get Big Tech to pay its “fair share” in tax to the national treasury or get advertisers to foot the bill? Why not first charge regular VAT on digital goods/services and then figure things out at @OECD? https://www.ft.com/...
Google joins Amazon and says will pass cost of digital services taxes on to customers. In contrast, Ebay have said will pay. https://www.ft.com/... via @financialtimes
Google will pass on cost of digital services taxes in Europe to advertisers. Attempts by governments to get part of US tech revenues will increase advertisers' cost From Nov, customers in UK, Turkey & Austria will be charged an additional fee for adverts. https://www.ft.com/...
Google is to pass on the cost of digital services taxes in Europe to advertisers. From November it will charge an additional fee for adverts served in the UK, Turkey and Austria, which explicitly covers the extra regulatory costs in those countries. https://www.ft.com/...
At some point European enforcers will notice nothing they do vis-a-vis Google/FB works because they aren't actually trying to restructure these monopolies. Or maybe they won't notice. https://twitter.com/...