UK to target online giants with new ‘Digital Services Tax’

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

After weeks of turmoil over Brexit Tory MPs will be looking to the Chancellor to raise party morale with his annual financial statement

Britain will introduce a new digital services tax aimed at tech giants from 2020, finance minister Philip Hammond said on Monday, responding to public outrage over low tax payments.

The tax would represent a shift in how these companies are taxed today: up to now, taxes have been calculated on profits, but that is problematic because of how companies report profits, and in many cases they are not recorded in the United Kingdom, even if the purchases of digital services are in the UK.

After the Chancellor announced the new levy on large digital platforms, Labour MP Margaret Hodge tweeted: "Think about the profits Google, Amazon, Facebook etc make in UK".

The tax would come into effect in April 2020 following a consultation, Philip Hammond stated in his 2018 Autumn Budget yesterday (29 October). The Treasury projects that the tax will generate £275m in 2019-20, rising to £370m in the following year, and reaching £440m by 2022-23.

The scheme, which offers a discount of £1,500 per office in England in an attempt to encourage local press back into town centres, for a further year. Such a tax would fall on consumers of those goods-and that is not our intention. But he described the progress on updating the tax law as "painfully slow".

"We wouldn't reverse that, we want more money in the economy, increased demand so people will spend".

The move to amend the tax rules comes amid a wider global effort by the Organization for Economic Cooperation and Development to overhaul the rules.

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The announced tax initiative comes as finance officials in the European Union have proposed sweeping new tax legislation targeting technology companies.

He added: "Google and Amazon have been avoiding tax payments which has given them an unfair edge over the competition [but] online retailers' financial advantage over bricks and mortar competitors is not the reason for the struggle and failure of traditional high street names".

"We would have a fair taxation system, we would ask the top 5% to pay a bit more income tax".

Hammond said on Monday that if a global solution emerges, Britain would consider adopting this instead of its levy. "It's the tax-paying entrepreneur that props up this country and it's time for these tech giants to pay their share". It is expected to raise about £400 million ($512 million) a year, Hammond estimated.

The European Commission hopes to target companies whose worldwide revenue amounts of €750 million, or 3% of what they earn.

Britain had been leading attempts to reform worldwide corporate tax systems, Hammond said, but progress had been painfully slow and governments could not simply talk forever.

But in the meantime, the government would consult on the detail to make sure it got its plan right, and then ensure Britain remained one of the best places to start and scale up a tech business.

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