EXCL Tech giants accuse ministers of 'no longer welcoming business' over digital tax

Posted On: 
9th March 2019

Tech giants have accused the Government of putting billions of pounds of investment in the UK economy at risk by planning to slap a new tax on their activities.

Facebook is one of the companies which would be hit by the new tax.
Credit: 
PA Images

The Internet Association - which represents Facebook, Twitter, Google and Microsoft in the UK - accused ministers of sending the signal that Britain "is no longer a welcoming environment for business".

Chancellor Philip Hammond announced plans for a Digital Services Tax in last year's Budget.

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He said the charge, which is due to come into force in April next year, would see a 2% levy placed on "UK-generated revenues of specific digital platform business models" and is expected to raise around £400m a year for the Treasury.

But in its submission to the Government consultation exercise on the proposals, the Internet Association says there should be an internationally-agreed way of taxing tech firms, rather than the UK going it alone.

A briefing on their response, seen by PoliticsHome, says: "IA believes that a UK Digital Services Tax sends a strong signal to internet companies that the UK is no longer a welcoming environment for business investment."

It points out that British tech companies attracted £6bn of funding in 2017 and says "a Digital Services Tax puts this economic contribution at risk".

They also claim the new tax would create more red tape for small internet companies, and could put a free trade agreement with America after Brexit at risk.

"A UK Digital Services Tax that appears to specifically target US companies is likely to be a barrier to any future UK-USA FTA as it would be regarded as a measure designed to restrict trade," the Internet Association says.

Instead, the umbrella body says an "internationally co-ordinated solution" should be found to deal with the issue.

Daniel Dyball, UK executive director of Internet Association, said: "Internet companies pay their current tax bills in full. What we want to ensure is that there is an agreed international approach which avoids double-taxation, keeps trade and investment flowing, and which treats all sectors of the economy fairly."

A Treasury spokesperson said: "The Digital Services Tax is a targeted, proportionate, and temporary tax that will ensure large digital businesses pay tax that reflects the value derived from their UK users. It will not apply to small businesses or businesses making UK losses - helping to protect start-ups.

"We’re committed to being the best place in the world to start and grow a digital business. Last year, UK tech companies attracted more venture capital investment than anywhere else in Europe."