Tech giants face new 'digital services' tax following United Kingdom budget

01 November, 2018, 02:31 | Author: Mary Valdez
  • Chancellor of the Exchequer Philip Hammond prepares his speech in his office in Downing Street London ahead of his 2018 Budget announcement on Monday. PRESS ASSOCIATION

Britain said it would tax the revenue that online platforms such as Google, Facebook and Amazon make in the country to update a system that had not kept pace with changing digital business models.

The tax doesn't specifically target the USA tech giants, instead casting its net wide across social media platforms, online marketplaces and search engines that generate over £500m per year globally.

"It's clearly not sustainable, or fair, that digital platform businesses can generate substantial value in the United Kingdom without paying tax here in respect of that business", Hammond said during his budget presentation to the British parliament. "It mostly comes down to small scale improvements in a range of forecast tax revenues - they keep coming in a bit better than expected".

Helen Coward, senior associate in corporate tax at law firm Charles Russell Speechlys, commented: "We now have some shape to the digital services tax - the so-called Amazon tax - being mooted by the government".

Hammond said the UK Government would continue to take part in conversations to create a global solution and would replace the digital services tax with a world-wide tax if and when one is agreed upon.

Paul Johnson, director of the Institute for Fiscal Studies, said: "He's just simply chose to spend all of that".

Tech companies which follow tax rules in their own country ends up paying little tax in other countries.

According to the finance minister, the tax will be created to ensure that established tech giants and not startups were shouldering the burden. FSB was credited in the speech for our campaign on this, stopping an over-reach which would have created a mountain of bureaucracy and a tax-hike for more than a million businesses.

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The tax is projected to yield £5 million in 2019/20, but will steadily increase to around £440 million in 2023/24.

And the tax cut will be backdated to anyone who has bought a shared ownership home since last year's budget.

This is the tricky aspect of the new tax; how do you hold the internet giants accountable within placing too much of a burden on the start-ups?

With the tax-minimization efforts of global technology firms in the spotlight, the British government unveiled a new plan Monday to ensure that Silicon Valley's finest pay their dues. The new thresholds will be frozen until the tax year starting in April 2021.

Google and Facebook have however changed the way they account for their activities in Britain.

The tax will be paid by companies that generate at least £500M in global revenues and will be introduced by April 2020.

"For 100 years, businesses have been taxed based on where they are, not where their customers are", he said.

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