-
The tax will apply to search engines, social media platforms and online marketplaces that generate at least 500 million pounds a year in global revenue.
-
That makes companies like Facebook, Google, E-bay and Amazon direct target of the new tax regime.
UK announced it would tax the revenue that online platforms such as Google, Facebook and Amazon make in the country to update a system that had not kept pace with changing digital business models.
“It’s clearly not sustainable, or fair, that digital platform businesses can generate substantial value in the UK without paying tax here in respect of that business,” finance minister Philip Hammond said in his annual budget speech on Monday.
The tax will be designed to ensure established tech giants, rather than start-ups, shoulder the burden, Hammond told parliament, and “will apply to search engines; social media platforms; and online marketplaces. That is because the government considers these business models derive significant value from the participation of their users,” the proposal reads.
The tax will be paid by companies that generate at least 500 million pounds a year in global revenue.
The Treasury said profitable companies would be taxed at 2 percent on the money they make from UK users from April 2020, and the measure was expected to raise more than 400 million pounds ($512 million) a year.
“The UK has been leading attempts to deliver international corporate tax reform for the digital age,” Hammond said. “A new global agreement is the best long-term solution. But progress is painfully slow. We cannot simply talk forever. So we will now introduce a UK digital services tax.
“It is only right that these global giants, with profitable businesses in the UK, pay their fair share towards supporting our public services.”
But given the dominance of U.S. tech giants, President Donald Trump’s administration may not appreciate the proposal at a time when Britain is trying to agree new trade deals.
But in the meantime, the government would consult on the detail to make sure it got this right, and then ensure Britain remained one of the best places to start and scale up a tech business.
Amazon paid £4.5m in UK tax last year, despite sales of £8.7bn. Google paid £49m on UK 2017 sales of £7.6bn. The auction site eBay paid £1.6m on sales of £1bn, but was later forced to pay an additional £6m after a review by HMRC.
Hammond made clear that the new tax would not be an online sales tax, which “would fall on consumers of those goods – that is not our intention”.