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iTunes(UK) Targeted By The Office of Fair Trading
dreadz1 writes "It seems that Apple is under fire for overpricing it's iTunes music for UK customers. This story from the BBC says that here in the UK we are charged 20% more for music on iTunes than the French and the Germans. Should Apple lower its initial price so that the cost+VAT is equivalent to prices in the EuroZone or should we grow up and get used to the fact that things are priced differently in different places?"
I hate to tell english people this but it should be 100% more. I was just there and the exchange rate is about 2 dollars = 1 pound. So a 30% charge barely covers the VAT.
You bleeding idiot.
"In the UK, iTunes charges punters 79p (120 euro cents) to download one track. In both France and Germany the cost is just 99 euro cents - about 67p."
Not 20% more numerically in different currencies, 20% more in value, in the same currencies. You really thought people couldn't account for the exchange rate? Shocking.
I don't know what exactlty the price difference is between UK and Germany, but for Slashdot readers to form their opinion, please take into account the following:
...
... are different between countries. The EU is for now still a free-trade zone that uses one single currency (well, the execpt UK and some other country) but it is NOT a single country. This means that you have different laws, taxes, wages, warranty requirements, ea. for different countries. So, necessarily the price that the end counsumer has to pay for a products is different. There is also a difference in shipping costs, between a country as large as Germany, and one as small as Belgium. Warranty on electronics in Germany is 2 years (by law). In Belgium it is 1 year. Translations of manuals for 100 million German speaking people or 10 million French/Dutch speaking also make products in Belgium more expensive. Etc.
- VAT rates are different for different countries in the Euro-zone. I think it is crap as well, but it is a fact of life. Most of the time you have two or three VAT rates on goods. 0% VAT, a basic rate and a high rate. The zero and basic rate are generally applicable to goods that are considered to be "basic necessities", e.g. food. The high rate is for "luxury items", e.g. electronics, perfume, services,
E.g. the VAT rate of books in Belgium is 6%, in the UK it is 0%. The VAT rate on a computer in Belgium is 21% and in Germany 16%. This causes serious price differences. Some companies decide to absorb the VAT differences and hence charge less excluding VAT in one country than the other, to avoid price differences. Others do not.
I live in Belgium, and it sucks to be in a country where everything execpt food is charged 21% extra... Well, social security is good though...
Local legislation, wages, taxes,
All these factors also causes end user prices to differ between countries.
I don't think that is fair at all, but it is the way it is... We can only strive for more European harmonisation... I for one, would like to have one single (read 'lower') VAT rate, tax rate, etc... but others (like the UK) are more protectionistic, and don't want the EU to take to much power....
The last time I checked the price excluding VAT of Apple harware in the Netherlands is higher than in Belgium, so I suspect Apple tries to harmonise the prices between the Netherlands and Belgium
Exchange rates fluctuate Exchange rates could be the reason for prices differences between the UK and the EU mainland. If the UK wants to avoid that: join the Euro! But, this also means companies like Apple have to hedge against exchange rate differences. (For information on hedging, see google.) Basically you make a contract to buy x amount of EUR in the future at a given exchange rate now. This COULD be safer for a company if it anticipates changing exchange rates correctly, but carries costs as well. These are also factored into the product end price.
And, as I said before, do not underestimate the wage effect...
By the way,
Inter-company trade does not have to pay VAT. VAT is a tax paid by endconsumers (private persons), companies that trade with each other pay VAT on goods they buy, but can redeem this from the tax authority. Companies charge the private persons VAT, and pay it to the government. It is a difficult system, search on google if you want to know more.
The CPI figure (Consumer Price Index) is down to 1.3% from 1.4% in July.
Figures taken from the BBC
I thought they weren't allowed to restrict trade within Europe due to EU law, hence why can't I buy from the German site?
probably because there isn't one music body that encompasses all of the EU; distribution rights are still country based.
Inflation isn't really that high in the UK, it's the strong GBP/weak USD that makes the UK expensive for Americans.
Decode these
They arent just there for the lower price the euro brings, most people I know visit France because they put less tax on cigarettes and alcohol than the UK does, and quite a few trucking firms I know about register and tax their vehicles in France or Belgium, because UK taxes are horrendous. Basically the UK government is bleeding the taxpayer dry. (greater than 70% of the price of petrol goes to the government, this is the reason we pay 80p a litre - or $6 a gallon - supposidly to make us use our nongreen cars less. And guess what? Convert your car to run on vegetable oil, which is a hell of a lot environmentally friendly, and you still have to pay that tax.)
But Vat is paid by customers in France and Germany too, at differing rates from the UK's 17.5% but not that much difference.
Also there are EU competition laws about charging different amounts for the same product in different EU states if the product is sold from the same location.
There's a half-decent guide to VAT over at Channel4 Money. Page 4 shows some of the interesting stuff that's VAT exempt - which is just different wording for zero-rated, apparently. And as you say, yes, the law is ugly! For instance: funerals are VAT-exempt, but headstones aren't; frozen food's exempt, but frozen food *that you eat frozen*, such as ice cream, isn't; it's so silly you'd think they were making half of it up! And don't even start on the Jaffa cake thing ;)
Simple economics it is, as long as a company has a right to charge more. In some cases they don't.
It could be argued that preventing people from other parts of the EU to buy things from say iTunes music store in Germany for no other reason than to charge more in another part of the EU, is in breach of the EU legislation on free trade. Companies within the EU does not have the right to stop people from buying their products in another part of the EU.
To compare differences on pricing between the US and UK to differences within the EU is irrelevant. The EU is a single market just like the US, so in this case it's more like if Apple would charge you differently should you live in California or in New Jersey.