United Kingdom to levy 2pc digital services tax against tech giants from 2020


The head of Britain's treasury has proposed a new tax targeting tech giants such as Google, Facebook and Amazon.com, in what he described as a necessary evolution of the corporate tax system in the digital age.

According to the Budget 2018 document, search engines, social media platforms and online marketplaces will pay a 2% tax on their revenues.

Hammond added that the tax will be "narrowly targeted", saying tech startups will not shoulder the burden. The Digital Services Tax will only be paid by companies which are profitable and which generate at least £500 million a year in global revenues in the business lines in scope. This would replace the current tax scheme through which they pay a 2% tax rate on revenues in the United Kingdom, which is a lot smaller. He stressed that a global agreement on digital tax was the best solution, but expressed concern at the slow progress of talks. "But the worry for the tech giants, and their shareholders, is that this is the pebble that starts an avalanche of taxes from worldwide governments", Hargreaves Lansdown analyst Laith Khalaf said.

Amazon was down 9 per cent, touching six-month low, while Google was off 5.5 per cent and Facebook was trading lower 3.5 per cent.

Philip Hammond MP, Chancellor of the Exchequer, stated: "As well as making work pay, we want working people to keep more of the money they earn", said Hammond.

The personal allowance and the higher rate threshold will rise from April in a move Philip Hammond said would mean "a tax cut for 32 million people". 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.

British MPs have previously criticised tech companies' tax arrangements as "immoral". The IAB stated that the tax could well a pose "disincentive for competitors to set up and grow in the UK" and "may also impact on mid-market players who drive competition and provide choice".

The Tories say that Scots should not be paying more in tax than elsewhere in the UK. It is expected to raise about £400 million ($512 million) a year, Hammond estimated. He's also signaled he intends to increase National Health Service funding by 20 billion pounds a year by 2023 without raising taxes.

However for the tech industry one of the most notable developments in this year's budget has been the "digital tax", and comes after years of complaints that American tech giants pay too little tax in certain European countries.