An "app tax" imposed by Apple and Google on in-app purchases and subscriptions is projected to cost British consumers more than £4 billion over the next five years, according to research commissioned by the Coalition for App Fairness (CAF).
The study found that smartphone and tablet users are currently paying an additional £700 million annually due to a levy of up to 30 percent charged by the tech giants. This cost is estimated to be around £55 per year for a family of four. By 2029, this figure is expected to rise to £1.2 billion annually, accumulating to approximately £4.1 billion over the five-year period.
Critics argue that Apple and Google leverage their market dominance, or "duopoly," to exploit consumers. While the fees are technically paid by app developers, such as Spotify and Tinder, campaigners assert that these costs are passed on to users, increasing prices for digital services.
Former Conservative tech minister Damian Collins described the fees as "excessive" and a "stealth tax," urging the UK's Competition and Markets Authority (CMA) to intervene. Liberal Democrat MP Martin Wrigley, who sits on the Commons technology committee, called the up to 30 percent charge "outrageous" and likened it to excessive credit card fees, arguing it deters UK app developers and represents an exploitation of consumers for profit.
Dominic Fean of CAF stated that British consumers are "overpaying" for digital purchases without their knowledge, due to the tight grip Apple and Google hold on the market. He emphasized the CMA's power to address this issue.
Apple's base rate for app developers is 30 percent, though a 15 percent rate was introduced in 2020 for companies earning below $1 million annually. Critics maintain this reduced rate is still too high. Furthermore, Apple's guidelines restrict apps from directing users to cheaper external payment options, requiring all transactions to go through Apple's system.
Google charges up to approximately 25 percent for in-app purchases on its Play Store, but has reportedly eased restrictions on steering consumers towards cheaper deals. The CAF research highlighted examples such as live-streaming platform Twitch, where "bits" (virtual currency) were found to be significantly more expensive when purchased in-app compared to directly via the website. Similarly, a subscription to Margaret Atwood's Substack blog was more costly through the app than through the website.
The Digital Markets, Competition and Consumers (DMCC) Act 2024 grants the CMA the authority to impose fee caps and fines on Apple and Google. While it is understood the CMA plans to intervene soon, it is not expected to issue fines or cap fees at this stage.
Apple stated that only about 15 percent of developers incur the 'tax,' with most paying the lower 15 percent rate. A spokesperson also contended that CAF is funded by developers who seek to avoid paying for the value derived from Apple's platforms. They added that Apple's rules are in place to prevent fraud and ensure parental controls are effective, protecting users who might otherwise bypass trusted payment infrastructure.
Google commented that the report conflates Android's open platform with others offering less choice and overlooks recent changes to its steering and fee structures, which they claim provide UK developers with more options and competitive fees. Apple does not apply its levy to free apps or those offering tangible services, such as Deliveroo and Uber, a practice largely mirrored by Google.