The app tax is a hidden fee that Apple and Google impose on every digital transaction made through their app stores, and it's costing UK consumers and developers billions. As the chair of the parliamentary science, innovation and technology committee, I've seen firsthand how these two tech giants control the mobile app ecosystem, charging up to 30% commission on in-app purchases. This isn't just a business issue—it's a racket that stifles innovation and inflates prices for everyone.
What Is the App Tax and Why Does It Matter?
The app tax refers to the commission Apple and Google charge developers for selling digital goods and services through their app stores. Whether you're buying a subscription, a game upgrade, or a piece of software, both companies take a cut of up to 30%. With no alternative platforms, developers have no choice but to accept these terms. This monopoly power extends beyond commissions: Apple and Google also prohibit "steering," which prevents developers from telling users about cheaper payment options outside the app store.
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For small British developers, this can mean the difference between survival and failure. A 30% hit on revenue is crippling, especially for startups already operating on thin margins. And consumers ultimately pay the price through higher costs.
How the App Tax Affects UK Developers and Consumers
The impact is far-reaching. Consider a UK developer selling a subscription service for £10 per month. After Apple or Google takes their 30% cut, the developer receives only £7. To maintain profitability, they must either raise prices or cut features. Consumers end up paying more for less.
Moreover, the lack of competition in app distribution means there's no incentive for Apple and Google to lower their fees. Unlike other markets where suppliers compete on price, the app store duopoly operates with impunity. This is why the UK government must step in to regulate these practices.
The Mobile App Monopoly: A Comparison of App Store Fees
Apple and Google dominate the mobile app market, but their fee structures vary slightly. The table below compares their standard commissions and policies.
| App Store | Standard Commission | Small Business Program | Steering Allowed? |
|---|---|---|---|
| Apple App Store | 30% | 15% for developers earning under $1M | No |
| Google Play Store | 30% | 15% for developers earning under $1M | No |
As the table shows, both stores charge the same standard rate, and neither allows steering. This uniformity is a classic sign of a duopoly that harms competition.
Key Takeaways for UK Policymakers and Consumers
- App tax rates are among the highest in any digital marketplace, yet developers have no alternative.
- Consumers pay more for apps and in-app purchases due to these commissions.
- Steering restrictions prevent developers from offering cheaper options, reducing consumer choice.
- UK developers are at a disadvantage compared to those in regions with stricter regulations.
- Parliamentary action is needed to curb the power of Apple and Google.
Why the UK Must Face Down Apple and Google
The UK has a proud history of standing up to monopolies, from the railways to telecoms. The app tax is the latest example of unregulated power harming consumers and businesses. As chair of the science, innovation and technology committee, I've called for a digital markets unit with teeth—one that can enforce fair terms and break the stranglehold of Apple and Google.
Other countries are already acting. The EU's Digital Markets Act forces gatekeepers to allow alternative app stores and payment systems. The UK risks falling behind if it doesn't follow suit. British developers deserve a level playing field, and consumers deserve lower prices.
FAQ
What is the app tax?
The app tax is the commission Apple and Google charge—up to 30%—on digital purchases made through their app stores. It's essentially a toll on every transaction.
How does the app tax affect UK consumers?
Consumers pay higher prices for apps and in-app purchases because developers pass on the 30% commission. It also limits choice, as developers can't offer cheaper alternatives outside the app store.
What can the UK government do about the app tax?
The UK government can establish a digital markets regulator to enforce fair competition, mandate alternative payment systems, and ban anti-steering provisions. This would align the UK with global efforts to rein in big tech.
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