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UK to Introduce New Digital Services Tax for Tech Giants from 2020

UK finance minister Philip Hammond said the tax would apply only to profitable businesses that generate at least 500 million pounds a year in global revenues.


Updated:October 30, 2018, 9:42 AM IST
UK to Introduce New Digital Services Tax for Tech Giants from 2020
Britain's Chancellor of the Exchequer Philip Hammond stands outside 11 Downing Street before he delivers his budget statement in the House of Commons in London on October 29, 2018. (REUTERS/Henry Nicholls)

London: 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.

"It is only right that these global giants with profitable businesses in the UK pay their fair share," Hammond told parliament as he outlined the government's annual budget.

Hammond said the tax would be introduced from April 2020 and would apply only to profitable businesses that generate at least 500 million pounds (562 million euros, $640 million) a year in global revenues.

The tax is expected to raise 400 million pounds a year, he said, adding that more details would be revealed later while stressing that it would not be a tax on online sales.

Hammond added that Britain would also continue to press for "international corporate tax reform for the digital age".

He quipped that he was "looking forward" to getting a call from former deputy prime minister Nick Clegg, who was named as Facebook's new head of global affairs earlier this month.

There is political and public unease over the levels of taxes paid by tech giants like Amazon, Apple, Facebook and Google.

Facebook earlier this month said its British tax bill tripled to 15.8 million pounds last year compared with 5.1 million pounds in 2016.

Facebook UK's revenues meanwhile swelled by 50 percent to 1.26 billion pounds last year compared with 2016.

There has been particular concern in Britain about online shopping giants such as Amazon undercutting traditional retailers.

Today's tax rules were designed for when multinationals developed real assets and operations in different nations, making it relatively clear where taxes were due.

But the US tech titans exist almost exclusively in the virtual world, their services piped through apps to smartphones and tablets from designers and data servers oceans away.

The European Commission, the EU's executive arm, has proposed a European tax on "big tech" with substantial digital revenue in Europe, based on overall revenue in Europe and not just profits.

But lead opponent Ireland says a growing number of countries are grumbling about hidden problems with the tax, including that it could inadvertently snag European companies.

There is also concern as to what consequences might flow from such a plan at a time against the backdrop of a potential full-blown EU-US trade war.

| Edited by: Nitya Thirumalai
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