The government inquiry into the price of tech products in Australia began public hearings today in Sydney. One argument we’re bound to hear from vendors trying to justify the ‘Australia tax‘ is that local taxes and expenses force higher prices to be charged here than elsewhere. Those arguments seem hard to swallow in an industry where Apple can make a 50 per cent margin on every phone it sells.
As Luke over at Gizmodo notes, if reports from Electronista that Apple makes a margin of up to 58 per cent on iPhones and 32 per cent on iPads are correct, then it is coining in at least $172 in profit for each iPad sold, and $463 on every iPhone. That doesn’t sound like an unprofitable business model. Apple hasn’t made a public submission to the inquiry, arguing that its pricing strategies need to remain confidential for commercial reasons, but has provided a closed-door briefing.
To be clear: I don’t think Apple itself is particularly guilty of charging the ‘Australia tax’ any more, although it has been in the past. Its app prices are now close to equivalent, as is the most recent incarnation of the iPad.
The two areas where it does charge higher-than-US prices are on music and media downloads, and on server hardware. The former is not entirely under Apple’s control (music rights remain regionally assigned by large companies). The latter is more pronounced, but there are plenty of keenly-priced non-Apple choices in that area. The bigger point is that there’s still plenty of profit in some technology areas, so Australian consumers shouldn’t pay an artificial penalty for digital goods just because of where we live.