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Tue, 14 July 2020

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Experts warn tech giants could duck Philip Hammond’s new 'gesture' tax

Experts warn tech giants could duck Philip Hammond’s new 'gesture' tax
2 min read

Big tech companies could wriggle out of Philip Hammond's newly-unveiled tax, experts have warned.

The Chancellor used this week's Budget to outline a new Digital Services Tax, which would come into force in April 2020 and is expected to raise £400m-a-year for the public purse.

The proposed tax comes after years of criticism against large tech companies such as Google, Amazon and Facebook, which pay very little UK tax in relation to their revenues.

But the plans have been questioned by tax experts, with accountant and tax avoidance campaigner Richard Murphy telling The Times: "It’s gesture politics and a missed opportunity. A tax of 2 per cent to raise a predicted £400 million is insignificant in the context of these companies’ activities and the wider budget."

He added that enforcement of the tax was likely to be difficult since it required knowledge of each company's UK income, which is not a statutory accounting measure or available in public accounts.

Daniel Bunn of the Washington-based Tax Foundation meanwhile told the paper: "If the UK government goes through with this and puts all the details out there, then during that process you will see as many firms as possible trying to define themselves out of the definitions the government has set for the tax . . . it’s unlikely they will take this lying down."

Unveiling the plans this week, Mr Hammond said it was "only right that these global giants, with profitable businesses in the UK, pay their fair share towards supporting our public services".

Countries have been grappling with ways to gain revenue from technology companies, with politicians in Spain considering a 3% tax on the ad and sales revenue of digital platforms, and the European Commission floating a similar tax.

But the Information Technology Industry Council, which represents big tech companies including Google and Facebook, said: "Imposing a digital tax could create a chilling effect on investment in the UK and hinder businesses of all sizes from creating jobs."

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