Google Digital Tax

The Brew

Eureka moment with a billion $ app idea. You start developingapp to make sure the same goes live on Google and Apple app store with expectation of million-dollar revenue in year 1

Business Model: Nos of apps sold 100,000 * USD 10 per app = One Million $

Hmm… That’s not how Google and Apple App store works

They have additional tax which they prefer to call as “THE FEE” which is as high as 30% when you purchase any application or any other in app purchase

So out of 1 million revenue you will be able to pocket only 0.7 mn (10lacs * 70%) and on top of that you will have to pay government taxes as well. Isn’tthis system bit absurd?

If we compare with credit card companies, they normally charge 1-2% as transaction fees as compared to digital app store who charges to as high as 30% on transaction

Well Basecamp, Epic Games, Tinder and bunch of other startups werenot happy with the system while Epic Games went one step ahead and allowed their users multiple choices to pay

  1. Within the app store (Which mean pay more digital tax) or
  2. Come to our website and pay (Straight 30% savings)

It didn’t go really well with these tech giants and Apple removed Fortnight Games (Epic Games) them from the play store for violation of the rules and conduct

To clarify this matter Google on Tuesday said that any app that chooses to offer in-app purchase of digital goods like unlocking additional features or buying tokens to power up a game character or paying for songs, will be required to use Google Play’s billing system.

This would mean that developers will have to start using Google’s billing system that charges a 30 per cent cut of the payment made within the app, starting September 2021.

However, physical goods (like ride hailing services) or paying for content subscription via the developer’s own website will not require Play billing.

If you think about it, Apple and Google have a monopoly over the app stores. Since their launch in 2008, they have evolved into powerful marketplaces featuring millions of developers around the world. For hosting these applications, Google and Apple began charging a commission to facilitate the development of store and upgradation of the same

These two companies do get the credit for helping accelerate an app economy. But at the same time, developers have become dependent on these two platforms to scale their apps. This is why developers have often criticised that these two companies are grabbing a bigger share of spoils than they should be.

Developers have bristled at the 30 percent cut demanded by Google and Apple, saying it is an inflated digital tax that hobbles their ability to compete. And because the two companies control almost all of the world’s smartphones, many developers gripe that they have no option but to adhere to their policies and pay the commissions.

This 30% tax by Google & Apple appstores has “DugnaLagaan Dena Padega” written all over it!

Until then

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Published By: akash On 02/8/21 1:15 PM