Apple and Google face crackdown over controversial ‘app tax’ which competition regulator suggests is not ‘fair and reasonable’ for smartphone and tablet users

Apple and Google are facing pressure over their controversial “app tax”, which the competition regulator says is not “fair and reasonable”.

Silicon Valley giants will be forced to give iPhone and Google-powered smartphone users access to cheaper deals when subscribing to their favorite apps, potentially saving consumers billions of pounds.

The plans were announced by regulator Competition and Markets Authority (CMA), which said intervention was ‘seriously’ necessary.

Supporters welcomed the move, saying it was a ‘major step forward’ to rein in Big Tech, protect consumers and ease the pressure on the UK’s booming tech sector. But they also stressed that the CMA may need to go further in the future.

Currently, Apple’s rules prevent consumers from finding cheaper deals elsewhere when making in-app purchases on their devices.

App makers are not allowed to offer any other payment methods, such as external links or QR codes, to iPhone users and must go through Apple.

Google has eased similar restrictions, but restrictions still remain.

This means Brits often have to pay a “hidden” tax of up to 30 per cent that tech giants impose on in-app purchases; This tax is also known as the “implementation tax”.

Apple charges app developers up to 30 percent tax on subscriptions and in-app purchases; critics say it is too

Google also charges app developers a tax of up to about 25 percent on subscriptions and in-app purchases.

Critics accused the tech giants of ‘exploiting’ consumers while branding fees ‘excessive’.

Although payments are made by app makers, including dating platforms such as Tinder and Hinge, campaigners say this is passed on to consumers.

This forces them to pay a third more for their favorite services after downloading them via Google’s Play or Apple’s App Store.

Critics also argue it is hitting the UK’s tech sector by stifling competition by absorbing profits that could be reinvested.

On Monday, the Mail revealed that research predicts Britons will earn an extra £4bn over the next five years thanks to the ‘tax’.

The CMA, which has launched a consultation on the plans, hopes the intervention will force Apple and Google to cut their fees to compete with cheaper offers available to consumers directly.

He said this would ensure the fees charged by Apple and Google were ‘fair and reasonable’.

But the regulator has resisted calls to impose fines or put a cap on the fees Google and Apple can charge.

Will Hayter, CMA’s Managing Director of Digital Markets, said: ‘We see this as the best way to bring competitive pressure to a vital part of the mobile ecosystem that is otherwise sorely lacking in such pressure.’

The regulator added that it believes consumers are currently overpaying for services for this reason and expects ‘fees to be lower than current app store charges’ under the changes.

Tory peer Baroness Stowell said: ‘The CMA’s proposals to make the pricing regime of Apple and Google’s app stores fairer and limit market controls are a major step forward for UK app developers and consumers.

Tory peer Baroness Stowell said CMA’s proposals were a ‘major step forward’ for UK app developers and consumers

Former Tory technology minister Damian Collins says CMA announcement is ‘welcome progress’

‘Whether they will go far enough remains to be seen, and if they don’t the CMA must take action again.’

Former Tory technology minister Damian Collins said: ‘This is a welcome progress that will make it easier for consumers to access better deals outside of Apple and Google platforms.

‘It will also help businesses innovate and offer new services to their customers.

‘But the CMA should also review the pricing regime in app stores; This is an issue they have previously raised concerns about Apple and Google making billions in excessive profits.’

But campaign group Enforcement Justice Coalition said the plans ‘risk becoming little more than cosmetic’ and do not go far enough.

A spokesman for the group said: ‘Today’s measures fall short of what is needed to meaningfully increase competition, reduce discrimination against digital businesses and improve outcomes for developers and consumers in the UK.’

They added that they would prefer the CMA as a cap on fees to ensure tech giants do not profiteer.

Liberal Democrat Martin Wrigley, who sits on the Commons technology committee, said this move was “a good step to break the stranglehold” between Apple and Google, but he wanted the CMA to go further.

He added: ‘But I would still like to see the Competition and Markets Authority investigate charges of up to 30 per cent for both downloads and in-app purchases in both the Apple and Google stores, and what value this offers to both developers and customers.’

The CMA’s consultations will be completed by August and the changes will begin later this year.

Apple said it would resist the announcement. A spokesperson said: ‘When users are removed from Apple’s trusted payment infrastructure, they lose the protections they trust Apple to provide [from fraud].

‘We will continue to make our concerns clear in our ongoing dialogue with the CMA.’

Google insisted that so-called ‘referral’ was already allowed, when consumers were given direct access to cheaper deals elsewhere.

A spokesman said: ‘We have already made the changes the CMA recommended today.’

Apple doesn’t tax free apps or apps that provide tangible services, like Deliveroo and Uber. It is generally similar for Google.