UK Government to introduce digital services tax


"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".

Britain's finance minister Philip Hammond called out on tech companies in his annual budget speech, saying that it is not "sustainable" or "fair" for digital platform businesses to generate income in the United Kingdom without paying the appropriate amount of taxes.

Hammond was keen to stress the tax would be on "tech giants" and not smaller start-ups, meaning it would only apply to companies that generate at least £500m revenue per year.

The U.K. government today announced plans to levy a "digital services tax" on major tech firms that could add up to hundreds of millions of dollars per year.

The Government said it remained committed to discussions relating to an global corporate tax framework, and would only apply the tax until a long-term solution is in place.

Hammond said on Monday that if a global solution emerges, Britain would consider adopting this instead of its levy.

In his speech on Monday, Mr Hammond said: "The rules have simply not kept pace with changing business models".

Finally, on a practical level, a digital services tax may well be hard to implement, and would add another layer of complexity to our already unruly tax code.

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Mr Hammond stressed that the tax will be created to ensure established tech giants, rather than start-ups, shoulder the burden.

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

Mr Johnson said that the rise in income tax thresholds announced by Mr Hammond would benefit the wealthy more than those less well-off, with a typical higher rate taxpayer gaining £176 a year and a basic rate payer gaining just £24.

"If you think, in many ways, about Brexit, Trump, the new Italian Government - as they call it the populist revolt - much of this is about ordinary, decent, law-abiding, tax-paying folks saying 'something really wrong, something unfair has happened in society'".

European officials critical of the current tax system say that governments are struggling to tax several forms of online activity, despite the enormous wealth generated by tech firms.

However, as the increase doesn't take effect until 1 January 2019, companies may want to defer expenditure until after this date if they're spending in excess of £250,000.

For years the internet giants have been shifting profits around and claiming suspect charges to reduce exposure to the tax man.

Tech companies however have defended their tax structures, and insist they abide by tax laws as they're now written.