Why proceeds in different currencies and countries are not equal for the same price tier?

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Sheldon15 OP

Created Apr ’23

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I have always wondered how Apple calculates the price tiers for different countries and currencies.

I'm well aware of the currency exchange rates and the fact that different countries have different taxes that must be taken into account.

Usually, two models are used for this - tax inclusive and tax exclusive. In other words, either the end price is increased to include the tax (customer pays extra to cover the tax) or the price stays the same and the seller covers the tax by his own expense.

However, in the App Store, neither of these two models are used - some kind of in-between model is used. The tax is included into the price, but only partially, and a part of the tax is still covered from the seller's expense.

In particular, Apple has scheduled a price change on May 9. In the price tier $9.99 the price in EUR will become EUR 9.99, and consequently the sales in EUR will be anywhere from $8.7 to $9.2 (before Apple commission fee), depending on the country, at the current EUR/USD exchange rate.

I would appreciate some explanation regarding the formula and the logic that Apple is using behind the pricing tier calculation.

It would appear more logical to me that in countries which introduce higher taxes, the customers would have to pay more to cover their taxes, and not automatically take it from the proceeds of the seller. Or at least give seller a choice of how to include/exclude the taxes from the price.

Thanks,

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Answer 1

endecotp OP

Apr ’23

I think Apple try to estimate the long-term trends in exchange rates. When they make a change, it does not try to align the prices with the exchange rates on that day, but rather with their forecast of what the exchange rates will be like over the next year or so.

Rounding to xx.99 prices is also a complicating factor.

the price tier $9.99 the price in EUR will become EUR 9.99, and consequently the sales in EUR will be anywhere from $8.7 to $9.2 (before Apple commission fee), depending on the country, at the current EUR/USD exchange rate.

Proceeds from a EUR 9.99 sale will vary from 6.79 in Croatia to 7.32 in Luxembourg, because of the different VAT rates in those countries (16% to 25%). (For 15% "small business" Apple commission.)

Note that years ago the prices were the same throughout the Euro-zone and everyone paid Luxembourg VAT because Apple operated through an office there. That changed a few years ago and now consumers pay their local rate of VAT. I wonder whether, if it had always been like this, Apple would have had different prices for different EU countries depending on their VAT rates.

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Answer 2

Sheldon15 OP

Apr ’23

The EUR is a little special because the same currency is used in many EU countries, while they have different VAT rates. For countries whose currencies are not supported and which use USD instead, the prices in the same tier vary quite a lot, depending on the local VAT rates. However this is not the case for EUR.

Before May 9th, most countries that use EUR had the same price for Tier 10 - €11.99 in most EUR countries, and only for a few of them, like Montenegro, the price ws €9.99 (they have much lower VAT I guess). After May 9th, all EUR countries will be equal to €9.99.

To me it looks questionable that for EU countries the burden of taxes is (partially) put on the App Store sellers by Apple without a choice. Moreover, some EU countries, who have higher VAT, therefore get more beneficial terms over other EU countries. The governments are rewarded for and benefitting from making their VAT higher, and we, the sellers in the App Store have to cover their decisions for our own cost, because of the fixed price for all EU countries.

I guess this is done to simplify the calculations and end up with nice round numbers, but I would like to hear some deeper explanation.

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