Recently, rumors surfaced online suggesting that “WeChat may no longer support iPhone 16,” pushing the ongoing “Apple Tax” debate into the spotlight. The so-called “Apple Tax” refers to the commission Apple charges app developers for providing services through its App Store and in-app payment system. The commission rate varies across different countries and regions, with rates as high as 30% in countries like China, drawing widespread attention. In contrast, Apple’s lower commission rates in the EU and the U.S. are the result of months or even years of regulatory and legal disputes. So, what standards does the “Apple Tax” commission rate follow? Why is it controversial in so many countries? And could more countries join the pressure on big tech companies in the future?
Apple’s commission rates mainly fall into two tiers: 30% and 15%
According to the latest data compiled by German research company Statista over the past 10 years of Apple’s quarterly reports, while Apple’s primary revenue source has always been hardware, service revenues, including App Store fees, have steadily increased. In Q3 of this fiscal year, Apple’s service revenue reached $24.21 billion, surpassing its hardware revenue. A report by Japan’s Nikkei Asia further reveals that Apple’s total revenue for the 2023 fiscal year was $383.3 billion, with App Store fees accounting for $22 billion, or about 34% of service revenue.
Generally, Apple charges a 30% commission on app purchases and in-app transactions within the App Store, but there are exceptions. First, this commission applies only to paid apps, although even free apps are required to pay certain fees to be listed in the App Store (individual developers pay $99 per year to join the developer program, while enterprises pay $299 annually). Additionally, the commission only applies to digital goods and services, not physical goods, so fees do not apply to purchases like groceries from Amazon or ride-hailing services from Uber.
Chairman of the Zhongguancun Information Consumption Alliance, Xiang Ligang, stated commission rates vary among companies and platforms, with no universal standard.
Apple does provide certain discounts for specific cases and companies. In general, Apple’s commission rates are divided into two tiers: 30% and 15%. First, the 30% rate applies only to transactions completed during the first year of a subscription. If a transaction occurs in the second year or later due to auto-renewal, a 15% rate applies. Small businesses with annual revenue of less than $1 million can also apply for the App Store Small Business Program, which allows them to reduce the rate to 15%. However, if a business surpasses this threshold in any given year, the remaining time in that year will revert to the standard 30% rate. If the business revenue falls below the threshold again, they will only regain eligibility for the reduced rate the following year.
“While the 30% commission rate seems high, it is actually comparable to fees charged by similar platforms, like the Google Play Store,” states an article by the prominent investment firm Insight Partners in February. Its “truly unique” aspect, the article explains, is Apple’s strict restrictions on app developers, including the prohibition of offering alternative payment options other than Apple’s, thereby preventing the avoidance of the “Apple Tax.” Apple argues that iOS, Safari, and the App Store are part of a fully integrated system designed to enhance user safety, privacy, and ease of use by blocking third-party platforms.
However, for certain companies, the “Apple Tax” can be avoided. “For more than a decade, Apple has required all digital goods sold in iOS apps to use Apple’s payment system, but suddenly, this rule seems not to apply to developers with special agreements with Apple,” reports The Verge, a U.S. tech media outlet. In 2020, Apple and Amazon announced a “landmark deal” that allowed users of the Amazon Prime Video app to rent or purchase movies without using Apple’s payment system. The report speculates that this move may have been due to Amazon’s influence, as Apple sought support from Amazon in building its Apple TV app and hoped to benefit from the new users Amazon attracted.
“Like real taxes, how much you pay depends on where you are”
Insight Partners notes that while the “Apple Tax” is not a literal tax, “like real taxes, how much you pay depends on where you are.” Initially, Apple’s rates were relatively low in the U.S. According to Apple’s official website, the company’s two commission tiers in the U.S. are 27% and 12%.
Nevertheless, U.S. businesses are still dissatisfied with these rates and Apple’s strict restrictions, with one of the most well-known lawsuits being Epic Games’ 2020 lawsuit against Apple. Epic Games bypassed Apple’s payment service by offering its own discount payment channel for in-game items in its popular game, Fortnite. Apple quickly removed the game, leading to the lawsuit. A ruling has been made, with the judge requiring Apple to allow alternative payment options in apps, but Apple has appealed, and the ruling has yet to be enforced. There are also rumors that the U.S. Department of Justice is preparing to investigate the “Apple Tax,” but no action has been taken yet.
The EU has long been dissatisfied with the fee discrepancies across regions. In January of this year, Apple officially announced changes to its App Store rules in the EU to comply with the Digital Markets Act (DMA), a law introduced by the European Commission in 2020 to establish responsibilities for digital service providers and curb anti-competitive practices by major online platforms. In September last year, six large companies, including Apple, were designated as “gatekeepers,” meaning they are subject to stricter regulations.
In June, the European Commission published preliminary findings, stating that Apple’s updated App Store rules still violated the DMA, leading to multiple lawsuits and the possibility of Apple being fined up to 10% of its global annual sales. EU Internal Market Commissioner Thierry Breton criticized Apple for “stifling innovation and depriving consumers of choice.”
In early August, Apple announced significant updates to its operating systems in the EU. Germany’s Der Spiegel reported that these updates include, for the first time, allowing third-party app stores, in-app payments, and web browsers. Regarding the “Apple Tax,” app developers in the EU will only need to pay Apple a 17% commission in the first year, dropping to 10% from the second year onward.
However, Focus magazine in Germany reports that while lowering the “Apple Tax,” Apple introduced two new fees: a 5% “initial acquisition fee” for new users in the EU and a 10% “store service fee” for any transaction within 12 months of app installation. Both charges are controversial, and the European Commission is already investigating them. Additionally, for high-download apps on both Apple’s and third-party stores, developers will be required to pay €0.50 for each first annual installation exceeding €1 million. Apple estimates that this core technology fee applies to less than 1% of apps.
Epic Games CEO Tim Sweeney criticized Apple, saying its actions “make competition impossible.” He added that while game developers may pay a lower commission and access new users, Apple’s new fees will be so costly that they will end up losing more money.
According to Japan’s Asahi Shimbun, Apple has been under investigation by Japan’s Fair Trade Commission since 2021. In June this year, Japan’s parliament passed new legislation based on the EU’s DMA, requiring tech companies not to block third-party app stores, payments, or web browsers. The law is set to be implemented by the end of 2025. Under the law, Apple’s standard commission rate in the App Store will drop from 30% to 17%, making it the lowest in East Asia. The Associated Press reports that the law significantly increases fines for abusing a monopoly position in app stores, raising them from 6% of annual revenue to 20%, with further increases to 30% for repeat offenders.
In 2021, South Korea also passed a law requiring app stores not to block third-party payments. In response, both Apple and Google have pledged to comply with the law, although Apple has required developers in Korea to submit additional documents related to third-party payments.
Last year, Apple was also sued in the U.K. for charging over 1,500 British developers “unfair commissions.” Apple argued that 85% of developers using its App Store do not pay any commission, and only those who have paid a commission through the U.K. App Store can file a claim. However, in April of this year, a British judge dismissed Apple’s defense, requiring the company to respond in court. The case is still ongoing.
“It’s unfair to consumers too”
A recent Nikkei Asia editorial stated: “After losing major regulatory battles in the EU, Japan, and South Korea, Apple is under global pressure from regulators to lower its 30% App Store commission rate. Attention is now turning to Apple’s second-largest market in the world—China.” The article suggests that limiting the “Apple Tax” could enhance fairness in the digital marketplace and promote competition from both a developer and consumer perspective. Lower fees and fewer restrictions on third parties would undoubtedly impact Apple’s profits, but they would foster innovation, provide users with more choices, and create a better business environment for developers.
Nikkei Asia noted that Apple’s fees in China are among the highest globally. In other countries and regions, Apple tends to be more flexible, offering more discounts. For example, Apple’s standard commission for small developers is 15%, but many small developers enjoy a reduced rate of 10%, a discount that Chinese small developers rarely receive.
Xiang Ligang stated that Apple’s collection of the “Apple Tax” is essentially a monopolistic use of its App Store platform, which not only harms the interests of app developers but is also unfair to consumers. Xiang Ligang said, “A healthy platform environment should provide valuable services and charge reasonable fees, rather than profiting through monopolistic practices.”
Germany’s Heise Online reported that, although Apple has made some improvements, the European Commission remains dissatisfied with how tech giants, including Apple, have implemented the requirements of the Digital Markets Act (DMA). The European Commission believes that many companies are still making it difficult for users to enjoy the “digital freedoms” mandated by the DMA, and this issue may also involve companies like Microsoft and Meta.
Xiang Ligang commented that the EU’s move to reduce Apple’s commission rates through the DMA is an example of using national or union power for market intervention, protecting the interests of small and medium-sized developers while reducing the monopolistic influence of large platforms. He believes that Apple’s practices are detrimental to the global digital industry, and in the future, more countries and regions may follow the EU’s example.
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