New Digital Services Tax in Britain Targets Online Giants

Pearl Mccarthy
November 1, 2018

The proposal would see USA giant firms in the likes of Facebook, Google, and Amazon paying additional taxes in the United Kingdom aside from the taxes they are already paying in the countries where their main headquarters are operating.

Chancellor Philip Hammond is proposing a 2% tax rate against the sales that social media platforms, internet marketplaces and search engines make in the UK.

The tax will be created to ensure established tech giants, rather than start-ups, shoulder the burden, Hammond told parliament.

Hammond said a global agreement remains the "best long-term solution", but the moving forward with its own tax amid slow progress in those talks.

Setting out his income tax cuts, he said the personal allowance will rise to £12,500 from April 2019 and the higher rate threshold will rise to £50,000.

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.

Philip Hammond has gambled with public money by using a fiscal windfall to splurge on the NHS - and could take the country down a path of higher debt and taxes, experts have warned.

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The Supreme Court's final ruling in the case is likely to have a significant impact on Japanese-South Korean ties. Japanese courts dismissed the case, saying their right to sue had been extinguished by the 1965 treaty.

"And far from people's hard work and sacrifices having paid off, as the Chancellor claims, this Government has frittered it away in ideological tax cuts to the richest in our society".

The shadow chancellor said on Tuesday the party would respect changes to tax thresholds that would cost £9.5 billion in lost revenue in the next six years.

Politically the digital tax is a win for the Conservative government, though at a time where the United Kingdom needs to make as many friends as possible while going through an expensive divorce, it is an interesting approach.

There has been particular concern in Britain about online shopping giants such as Amazon undercutting traditional retailers. 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". It is expected to raise more than £400 million a year.

According to Hargreaves Lansdown analyst Laith Khalaf, a tax of say 400 million pounds might seem insignificant when you compare it to the amount of revenue companies like Amazon make every year but tech giants and shareholders should look at it like a small amount that could trigger so many taxes from global governments.

"I didn't come into politics to put taxes up, and the improvement we have delivered in the public finances means that based on the [Office for Budget Responsibility's] forecast published today, I do not need to do so".

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