Tuesday, 20 November, 2018

Amazon, other tech giants face United Kingdom 'digital services tax'

Philip Hammond discusses the Budget at No 11 Downing Street Philip Hammond discusses the Budget at No 11 Downing Street Credit Rii Schroer
| 02 November, 2018, 16:16

A tech tax is already being considered by the European Commission, which in March this year unveiled its proposals in an effort to get leading (and mostly American) technology companies to pay more tax.

The budget, which was delivered by chancellor Philip Hammond on 29 October, details that the tax only applies to businesses with annual revenues of £500 million or more, and will come into effect in April 2020.

According to the finance minister, the tax will be created to ensure that established tech giants and not startups were shouldering the burden. But speaking later on BBC Radio 4's Today programme, Mr Hammond said: 'When you make a promise to the electorate and they elect you then you have an obligation to deliver on that promise.' The Institute for Fiscal Studies yesterday said the Conservatives had pulled nearly a million people into the higher tax bracket in the past eight years. "But the worry for the tech giants, and their shareholders, is that this is the pebble that starts an avalanche of taxes from worldwide governments", Hargreaves Lansdown analyst Laith Khalaf said.

Both Google and Facebook have changed the way they account for their activity in Britain.

Les Cameron, tax expert at Prudential, says: "The bringing forward of the £12,500 personal allowance and £50,000 higher rate threshold will be welcome to those on lower incomes but we mustn't forget that increasing personal allowances are bad news for higher earners". But a number of counterbalances showed that Facebook had a tax charge for 2016 of 5.1 million pounds in Britain compared to the 4.2 million pounds it had in 2015. He stressed that a global agreement on digital tax was the best solution, but expressed concern at the slow progress of talks.

Britain has been making attempts to implement a change to worldwide corporate tax systems, but progress has been seen to be slow.


According to Mr Hammond, the tax will be skewed to social media platforms, online marketplaces, and search engines.

"The UK is running ahead of every other country except Spain", he said.

"We would take appropriate fiscal measures to protect the economy, to prepare us for the future and to strike out in a new direction that would ensure that Britain was able to succeed, whatever the circumstances we found ourselves in".

"Given the dominance of the US tech giants, it is hard to see the Trump administration taking kindly to the digital sales tax as the United Kingdom sets out its stall for the best possible trade deal with the US", Dan Neidle, a tax partner at law firm Clifford Chance told the BBC.

Amazon and Netflix declined to comment.

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