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Britain to tax digital businesses

31 Octobre 2018

Speaking in the Commons on Monday, Philip Hammond said: "A new global agreement is the best long term solution". But progress is painfully slow.

But the prime minister rejected such talk, saying: "We are not preparing for another general election".

"So we will now introduce a UK Digital Services Tax", Hammond added.

It is something sure to be of interest to Facebook's UK head of public policy Rebecca Stimson and Google UK interim head of public policy Katie O'Donovan when they give evidence on internet regulation to a House of Lords committee on Tuesday afternoon.

The levy, which is scheduled to go into effect in 2020, will apply to companies that record a profit and generate at least 500 million British pounds, or about $640 million, in global annual revenue.

The announcement in the week of Halloween prompted The Sun tabloid to report the news with photo-montage depicting Facebook chief Mark Zuckerberg as Dracula.

Experts have warned about the potential impact of the tax.

I am delighted that this week's budget has marked an important step towards achieving this.

It also lays out an interesting landscape for how the United Kingdom plans to raise money in a post-Brexit country after it leaves the European Union and the wider tax code that exists around it. However, it remains to be seen whether applying different levels of taxation to different digital businesses will lead to a legal challenge of the DST under State Aid rules.

Hammond highlighted that the looming digital tax would not be an online sales tax on goods purchased online.

A multilateral solution would, of course, be better: a scatter-gun approach by individual countries could mean companies are taxed on the same income twice. With a new tax thrown into the mix, we do not yet know how they will respond.

The EU is looking at a similar plan to make companies pay a three percent tax on turnover for their online services.

But the need for unanimity on an European Union level makes progress hard.

While Amazon provides a good example of the rationale behind the tax, some feel that Apple is the big target here because of its high revenue in Europe that ends up going through its headquarters in Ireland, a low-tax safe haven.

However for the tech industry one of the most notable developments in this year's budget has been the "digital tax", and comes after years of complaints that American tech giants pay too little tax in certain European countries. Cuts are not about to be reversed.

"Now we know", he said.

"When we first said it in the summer we suggested we might have to raise taxes, we would have to raise taxes, to fund part of that". Further complicating the picture, the government is pushing ahead with plans to roll out a new comprehensive welfare program that critics say will leave the most vulnerable worse off.

Britain to tax digital businesses