What you need to know about Britain’s "Digital Services Tax"
What you need to know about Britain’s "Digital Services Tax"
After weeks of turmoil over Brexit Tory MPs will be looking to the Chancellor to raise party morale with his annual financial statement
01 November, 2018, 13:25
"Fiscal Phil" has targeted online tech giants by announcing a new digital services tax in his Budget, promising to "deliver global corporate tax reform for the digital age".
Paul Johnson, director of the Institute for Fiscal Studies, said Mr Hammond had "got lucky" because tax revenues were better than expected.
The measure comes in response to growing backlash against US-headquartered tech giants that pay disproportionately small amounts of tax on United Kingdom profits.
The Chancellor also insisted that his Budget tax cuts and spending hikes were not meant to woo voters ahead of an early poll.
Tim Bennett, a partner at Killik & Co, said: "Setting Britain on a solo collision course with some of the world's biggest technology companies may be interpreted as either courageous or a little foolish".
But the prime minister rejected such talk, saying: "We are not preparing for another general election".
Mr Hammond stressed that the tax will be created to ensure established tech giants, rather than start-ups, shoulder the burden.
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Mr Mackay said: "With the UK Government's preferred approach to Brexit set to hit people's incomes in Scotland by £1,600 a head, the changes in this year's Budget do nothing to alleviate the impact Brexit will have". This will be a narrowly-targeted tax on the UK-generated revenues of specific digital platform business models.
"The new tax isn't even set to be implemented until 2020, at which time the tech giants will start to enjoy a 2% cut in their corporation tax rate". The tax would only apply to profitable companies, but could be abolished if members of the Organisation for Economic Co-operation and Development (OECD) can agree a formula for taxing internet giants.
The tax will be paid by companies that generate at least £500M in global revenues and will be introduced by April 2020.
Online companies like Amazon have always been criticised for not paying enough tax despite receiving millions of pounds' worth in Government contracts each year and enjoying a boom in profits. Usually it is harder for smaller firms to be tracked on their digital sales, and it is more likely for the smaller online firms to evade taxes.
The European Commission hopes to target companies whose worldwide revenue amounts of €750 million, or 3% of what they earn. We promised to do so and we have done it.' Experts had feared Mr Hammond would be forced to renege on his promise to increase income tax thresholds in a bid to cover the cost of the £20billion funding pledge to the NHS. In a column on The Drum, IAB chief executive Jon Mew argued that such a tax risked harming the UK's digital ad market.
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