United Kingdom to Slap New Tax on Technology Giants

Simon Moss
November 4, 2018

In a move created to put the United Kingdom at the forefront of worldwide action to adapt tax systems to the digital age, the Chancellor announced a £400 million levy aimed at internet giants such as Google and Facebook. This means digital services such as Amazon, Facebook, and Google are likely to fall into this category.

Netflix and Apple, the others in the so-called FAANG group of stocks, were down 8 per cent and 3.6 per cent respectively.

In his annual budget speech on Monday, finance minister Philip Hammond said that it is not sustainable or fair that digital businesses are able to generate substantial value in the United Kingdom without paying their taxes here in respect to that business.

Hammond added that the tax will be "carefully designed" to ensure it targets established tech giants - rather than tech start-ups. Elsewhere, tech companies coming from outside of the United Kingdom will be prone to paying higher tax, providing that they are earning more than £500m globally.

Shadow chancellor John McDonnell said the Budget could signal a general election ahead.

Beginning in 2020, the tax would be assessed on "digital services companies" that register minimum annual revenues of £500 million ($640 million) globally. According to information from Tax Watch, Facebook paid just £15.8m in United Kingdom tax previous year despite collecting a record £1.3bn in British sales.

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Hammond predicts it is expected to generate more than £400 million a year and the United Kingdom would introduce the tax on online firms that are profitable and make more than £500 million per year in global revenue.

Hammond said that Britain has been at the forefront of corporate tax reform and acknowledged that a "new global agreement" remains the best solution in the long run.

Clifford Chance tax partner Dan Neidle said the radical nature of the proposal clearly showed that Britain was becoming frustrated with the slow pace of change in global tax laws.

We'll update this story when the full details of the new tax emerge. Facebook and Alphabet, Google's parent company, also fell in recent trading.

"The combination of a £1.5bn investment in the high street and a two per cent tax on large digital firms, in my opinion, is one of the most aggressive efforts to "level the playing field" between online and offline retail in recent times", said Jeremy Gilman, senior vice presideny of strategy at DMI.

"They want big tax cuts for the wealthy, Mr Speaker, so they choose some so-called middle-class profession and put in their package of tax cuts for the wealthy a very small, nugatory amount for those who it seems might be in the middle", she told the House.

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