The government will soon impose a ‘digital services tax’ on UK revenues generated by “established tech giants” like Facebook, Google and Amazon.
The 2% levy was announced by chancellor Philip Hammond in the Autumn budget today (29 October). It will come into force in 2020 following a period of consultation.
The announcement follows on from heavy criticism about the amount of tax tech behemoths pay to the treasury. In most instances they are gleaned from ad revenues – in comparison to their UK profit.
How much tax do tech giants pay?
Facebook UK revenues: £1.26bn Tax: £15.8m (2017)
Amazon UK revenues: £72m Tax: £4.5m (2017)
Google UK revenues: £1bn Tax: £36.4m (2016)
Snapchat UK revenues: £26m Tax: £360K (15 months to Dec 2016)
Twitter UK revenues: £76m Tax: £1.2m (2015)
Without going into detail, Hammond said the levy wouldn’t apply to “small UK startups.” But instead be targeted at profitable digital services companies that generate “at least £500m a year in global revenue”.
Kill or cure?
Ahead of the announcement, IAB chief executive Jon Mew argued that such a levy risked harming the UK digital ad market.
“While the government has said it wants to focus new measures on larger businesses, it would be difficult to avoid collateral damage across the sector and a negative effect on competition,” Mew warned.
“A tax on revenue would create a disincentive for competitors to set up and grow in the UK market. And would impact on mid-market players who drive competition and provide choice.”
Mew suggested that if the government was truly committed to leading the charge on innovation-friendly regulation that supports the growth of the tech sector then it should focus on supporting efforts to accelerate the EU Commission and OECD process to agree to an international approach to digital taxation.
Source: The Drum