Economy

UK Will Force Global Tech Companies To Pay A Digital Tax

UK Will Force Global Tech Companies To Pay A Digital Tax”

A "digital services tax" will be introduced in April 2020, following a consultation with the industry and other figures.

The new tax seems to try and minimize the corporate greed shown by the big names in tech who have used the United Kingdom's existing tax laws to minimize tax payments in the country despite making billions of pounds there.

During the last Budget before Brexit, Hammond also announced £675 million funding to help local councils make plans to improve high streets up and down the country.

It is created to target established tech giants which are profitable and which generate at least £500m a year in global revenues.

The digital services tax is set to be introduced from April 2020 with hopes it could bring in £400m in 2021-22 and £440m the year after.

To get himself out of that corner, the chancellor would have to raise taxes, or more likely, continue to borrow money, the IFS said.

In the absence of a global agreement, which is now being worked on by the Organisation for Economic Co-operation and Development (OECD), the European Union (EU) has been working on an initiative since new rules were proposed by the European Commission (EC) in March 2018.

Speaking in the Commons on Monday, Philip Hammond said: "A new global agreement is the best long term solution".

European officials critical of the current tax system say that governments are struggling to tax several forms of online activity, despite the enormous wealth generated by tech firms.

"Now we know", he said. The tax targets companies with worldwide annual revenues of €750m or more and that have European Union taxable revenues of at least €50m. The Digital Services Tax will only be paid by companies which are profitable and which generate at least £500 million a year in global revenues in the business lines in scope.

Carolyn Fairbairn, director-general of the CBI, said on Monday the new tax was a "high risk" move. "But tech startups and entrepreneurs can be forgiven for feeling that they could still end up in the sights of future chancellors".

Facebook UK's revenues meanwhile swelled by 50 percent to £1.26 billion previous year compared with 2016.

A multilateral solution would, of course, be better: a scatter-gun approach by individual countries could mean companies are taxed on the same income twice. However, it remains to be seen whether applying different levels of taxation to different digital businesses will lead to a legal challenge of the DST under State Aid rules.

He said: "The tech giants do need to pay more in tax but the measure announced today is pittance for these massive global companies".

Philip Hammond's budget, which was billed as marking an end to austerity, will actually benefit rich families 14 times more than the poor, new analysis has revealed.

Dean said the tax could lead to retaliation from the US.



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