UK Government to introduce digital services tax

UK announces digital services tax on tech giants

The Autumn Budget's impact on stocks, markets and investors, 29 Oct 2018 17:54

For the first time, the government has instituted a Digital Services Tax on the "revenues of search engines, social media platforms and online marketplaces, reflecting the value they derive from United Kingdom users".

According to the finance minister, the tax will be created to ensure that established tech giants and not startups were shouldering the burden.

The proposed scheme, which is set to take effect in April 2020, would require companies such as Alphabet Inc. and Facebook pay a 2 percent tax on certain income generated within Britain.

Hammond said on Monday that if a global solution emerges, Britain would consider adopting this instead of its levy.

This will reportedly increase the number of taxpayers taken out of income tax since 2015-16 to 1.74 million, and will result in there being almost one million fewer higher rate taxpayers than there were in 2015-16.

In their letter, tech giants such as Spotify,, and Zalando warned that the digital tax could result to unfair market treatment, double taxation for the businesses, and could possibly be emulated by other countries.

The tax is expected to raise £400 million a year, he said, adding that more details would be revealed later while stressing that it would not be a tax on online sales.

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The Chancellor said that it wasn't a tax on goods bought online.

After shadow chancellor John McDonnell said Labour would end the working-age benefit freeze if it gained power, the party is set to table Budget amendments calling for income tax rises for high earners.

Britain had been leading attempts to reform global corporate tax systems, Hammond said, but progress had been painfully slow and governments could not simply talk forever.

CIOT asserted that the existing principles of worldwide tax law remain to be the best way to tax the global profits of multinational companies. The tax would only apply to profitable companies, but could be abolished if members of the Organisation for Economic Co-operation and Development (OECD) can agree a formula for taxing internet giants.

The change will mean an annual tax saving of £130 for basic rate taxpayers, £860 for higher rate taxpayers and £600 for additional rate taxpayers in England and Wales.

Criticised by Mr Corbyn for choosing a "tax cut for higher earners" rather than ending a benefit freeze, she replied: 'On Monday, he said cutting taxes for 32 million people was frittering money away on ideological tax cuts.

But What Is A "Digital Services Tax" - And How Will It Work?

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