UK Must Confront Apple and Google Over the ‘App Tax’ on Smartphone Users

Discussions surrounding major technology firms and their regulation often seem remote from the pressing issues faced by everyday voters. However, the extensive influence that a select few global tech companies wield in our lives is far more significant than most people realize.

As the chair of the parliamentary science, innovation, and technology committee, I have consistently voiced my concerns regarding this issue. These concerns extend from the vast amounts of data collected and the digital “twins” created in our likenesses to the algorithms that dictate what content is presented to our children.

One particularly overshadowed aspect of this power dynamic is the app tax, which affects nearly every smartphone user in the UK. Apple and Google dominate the two principal app stores that facilitate access to almost every mobile application in the country. This monopoly allows them to impose terms on app developers that would be rejected by most businesses if proposed by a supplier. For instance, any subscription, game, or software sold through these app stores incurs a hefty commission of up to 30% on in-app purchases, irrespective of the product’s nature or production costs. Without alternative platforms, developers must comply with the conditions dictated by these Silicon Valley giants.

Moreover, developers are also barred from informing users about cheaper alternatives available outside these stores, a practice known as “steering.” Such restrictions, enforced by Apple and Google, serve to protect their profits. For smaller UK developers, this can mean the difference between hiring new talent, launching innovative products, or even deciding whether to grow their business domestically or relocate abroad.

Consumers bear the brunt of these policies as well. Research conducted by the Coalition for App Fairness indicated that British consumers collectively pay around £700 million annually to Apple and Google, which is £232 million higher than the total corporation tax these companies paid in the UK last year. This translates to approximately £55 per year for a household with four smartphone users. This hidden cost is embedded into product pricing and has little to do with the value added by the companies themselves.

In my previous role with Ofcom, the regulator overseeing communications markets, I focused on evaluating market competitiveness, recognizing that true consumer choice flourishes in competitive environments. The Competition and Markets Authority (CMA) has established that Apple and Google maintain a duopoly in the mobile platform sphere, with at least 90% of UK mobile devices operating on their platforms. Developers have no choice but to distribute their applications through either the Apple App Store or the Google Play Store. If a developer finds Apple’s terms unfavorable, they cannot simply move their app to another store, leading to stagnation in pricing and innovation.

In 2024, Parliament recognized this challenge and enacted the Digital Markets, Competition and Consumers Act (DMCCA), which received cross-party support. This legislation empowers the CMA to mandate changes in the behavior of dominant platforms. However, the CMA has so far opted for weak, voluntary commitments from Apple and Google rather than enforcing binding requirements.

The CMA has recently concluded its consultation regarding “steering,” which could allow developers to direct users to lower-priced options available elsewhere. Many stakeholders are concerned that any resulting decision may result in mere voluntary measures rather than mandatory regulations.

This moment presents an opportunity. It will be one of the first substantial decisions made by the government regarding big tech, influencing its future stance on this critical issue. The Prime Minister has emphasized the need for tech sovereignty, aiming to decrease our reliance on a select few overseas platforms. This intention should be reflected in decisions like these.

Ultimately, the goal isn’t to stand against technology or growth; rather, it is about ensuring that British consumers, developers, and regulators have a voice in shaping the conditions under which technology operates within our market and impacts our society. I urge the CMA to exert the authority assigned to it, and I encourage my governmental colleagues to support this initiative.