Turning up the heat on Silicon Valley’s most powerful players, the British government today unveiled plans to tax the U.K.-generated revenues of search engines, social media platforms and online marketplaces at a rate of 2 percent from April 2020.
The tax will only apply to those companies whose global revenues are in excess of 500 million pounds in order to shelter start-ups and is expected to raise around 400 million pounds for the British public coffers by 2022 and 440 million pounds the following year.
Finance minister Philip Hammond, who was presenting his annual Autumn Budget on Monday, told Parliament that while these digital platforms “have changed our lives, our society and our economy mostly for the better,” they also pose a real challenge for the sustainability and fairness of Britain’s tax system.
“The rules have simply not kept pace with changing business models and it’s clearly not sustainable, or fair, that digital platform businesses can generate substantial value in the U.K. without paying tax here in respect of that business,” he said. “It is only right that these global giants, with profitable businesses in the U.K., pay their fair share toward supporting our public services.”
This tax, however, may not be permanent as it is understood that the U.K. government will put it in place as it waits for the Organization for Economic Cooperation and Development and the European Commission to agree upon an international tax deal.
Hammond described progress as “painfully slow,” adding that “we cannot simply talk forever,” but stated that if a deal emerges, he would consider adopting it in place of the U.K. Digital Services Tax.
Carolyn Fairbairn, director-general of business lobby group CBI, said: “Going it alone on a digital services tax is high risk. The government should move in step internationally, leading multilateral solutions, or risk losing our global competitive edge in digital.”