‘Fiscal Phil’ has targeted online tech giants by announcing a new digital services tax in his Budget, promising to “deliver international corporate tax reform for the digital age”.
Speaking in the Commons on Monday, Philip Hammond said: “A new global agreement is the best long term solution. But progress is painfully slow. We cannot simply talk forever. So we will now introduce a UK Digital Services Tax.”
But What Is A ‘Digital Services Tax’ – And How Will It Work?
The new UK Digital Services Tax to be introduced in April 2020 is a “narrowly targeted tax” on the UK generated revenues of digital platforms.
It is designed to target established tech giants which are profitable and which generate at least £500m a year in global revenues.
Will It Affect Me When I’m Buying Goods Online?
No. The Digital Sales Tax will not be an online sales tax on goods ordered online. It is a tax that will only be paid by companies.
Will Companies Like Facebook and Google Be Affected?
Online giants such as Amazon, Google and Facebook are all likely to be hit with the new tax measure.
In a dig at former Liberal Democrat leader Nick Clegg, who was recently hired by Facebook, the Chancellor said he looked forward to receiving a call from him.
Will Tech Start-ups Have To Pay This Tax?
The Chancellor has given reassurances that it will be tech giants who will be affected by the tax. He told the Commons on Monday: “It will be carefully designed to ensure it is established tech giants rather than our tech start-ups that shoulder the burden of this new tax.”
How Much Money Will This New Tax Raise?
Tech companies will be taxed 2% on the money they make from UK users. It will target online giants with more than £500m in global revenues. The new tax is expected to raise about £400m a year.
After the Chancellor announced the new levy on large digital platforms, Labour MP Margaret Hodge tweeted: “Think about the profits Google, Amazon, Facebook etc make in UK. And we’ll only get £400m from them. Not serious change. Simply gesture politics.”