UK Chancellor Philip Hammond has announced plans for a 2 percent digital services tax on large social media platforms, search engines and online marketplaces. The new tax will be applied from April 2020 on revenue earned linked to UK users.
Hammond said it was not fair that digital platform businesses can generate significant value in the UK without paying tax here in respect of that business. He stressed that a global agreement on digital tax was the best solution, but expressed concern at the slow progress of talks. This UK Digital Services Tax would be a narrowly-targeted tax on UK-generated revenues of specific digital platform business models. He insisted that it would not be an online sales tax on goods purchased online, and would target established technology giants and not technology start-ups.
The new tax would only be paid by companies which are profitable and generate global revenues of at least GBP 500 million a year. The UK Government expects it to raise more than GBP 400 million a year and will consult on the details at a later date. Hammond said the Government would continue working with the OECD and G20 to seek a global agreement, and would consider adopting any globally agreed solution in place of the UK Digital Services Tax.
In response to the proposal, industry group TechUK said this kind of tax would be bad for investment and bad for the economy, insisting that it opposed any tax that seeks to narrowly target businesses just because they are digital. The group added that this was an international tax issue that requires an internationally-agreed solution. It warned that the proposals risk undermining the UK's reputation as the best place to invest or start a tech business, and that the GBP 500 million revenue threshold was relatively low and would affect much smaller technology companies than expected.
