Budget 2018: New 'Google tax' planned for 2020
By Oliver Haill
Date: Monday 29 Oct 2018
(Sharecast News) - Giant tech companies will face a new 2% tax on their British revenues, Chancellor Philip Hammond warned in his budget statement on Monday, though not until April 2020.
Hammond said the new "UK digital services tax" will be applied only to large and profitable tech companies generating global revenues of at least £500m, with the tax coming into effect from April 2020.
With tax rules not keeping pace with digital developments, the Chancellor said digital platform businesses can generate substantial profits in the UK without paying much tax and that while the UK has been working with other countries on developing a global solution, progress has been "painfully slow".
He said the new digital tax will be "narrowly targeted" on the UK-generated revenues of specific platform business models and will be carefully designed so that large tech giants should shoulder the burden, not small UK companies.
Hammond said he expected the new tax to raise £400m a year and up to £440m by the end of the budget period in 2023/24.
He also committed to a review in 2025, indicating that he thought that it may take quite a while for the OECD to gain any consensus on the international stage.
Chris Sanger, head of tax policy at accountant EY, said the plans moved away from the EU blueprint, by setting the rate at 2% compared to the EU proposal of 3%.
"In drawing distinctions from the model under discussion in Europe, the Chancellor can be seen to be, once again, leading the debate in this contentious area, and we now wait to see which other countries follow in this battle over who should have the right to tax the profits of the internet giants," Sanger said.
"Caught up in the disputes between governments, business face the risk of double taxation and complex rules. That isn't the best environment to encourage innovation at a time when the Chancellor is looking to the digital sector to boost the economy."
The Institute of Directors was even more cautious.
"The new proposed digital services tax may make political sense, but it has been announced with scant detail on how it will work apart from the revenue threshold, which is lower than even the EU has suggested. The Chancellor must proceed with extreme caution here," said Stephen Martin, IoD director general
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