Published: Thu, November 01, 2018
Medicine | By Tracy Klein

Amazon, other tech giants face United Kingdom 'digital services tax'

Amazon, other tech giants face United Kingdom 'digital services tax'

In his Budget statement this afternoon, Chancellor Phillip Hammond revealed a two percent "digital services tax" on large tech firms such as Amazon, Facebook and Google.

Hammond, who unveiled the news during his Budget address in the Houses of Parliament, said that he expects to raise around £400M ($511M) per year by taxing companies that operate search engines, social media and online marketplaces. It will be carefully created to ensure it is established tech giants - rather than our tech start-ups - that shoulder the burden of this new tax.

Hammond said the tax would be introduced from April 2020 and would apply only to profitable businesses that generate at least £500 million (562 million euros, $640 million) a year in global revenues. A new global agreement is the best long-term solution, but progress is painfully slow.

But he also followed through on a pledge to hike the 40p tax rate threshold from £46,350 to £50,000, meaning the richest 13 per cent of Brits will be able to earn much more before they start paying higher tax - gaining £860 a year.

And it warned that tax rises are "all but inevitable" in the longer run to pay for the pressure on the NHS of Britain's ageing population. The chancellor added that the UK Government welcomes discussion on a possible replacement if there proved to be a consensus objecting the implementation of the digital services tax.

John McDonnell has come under fire from within Labour ranks after backing Philip Hammond's income-tax cuts for millions of people. But the social media company claim that in the United Kingdom just 5% of sales were converted into UK-taxable profits allowing it to pay very little tax as it claimed its profits were reduced by a £444m charge for unexplained "administrative expenses".

Amazon was down 9 per cent, touching six-month low, while Google was off 5.5 per cent and Facebook was trading lower 3.5 per cent. Companies have been accused of falsely reporting or reducing profits in order to pay less tax. Confusingly, that does seem to, however, contradict the Chancellor's speech which referred to global turnovers in excess of £500m.

This 2 percent compares differs to the 2 to 6 percent of turnover tax that had been mooted previously by French economy minister Bruno Le Maire.

However for the tech industry one of the most notable developments in this year's budget has been the "digital tax", and comes after years of complaints that American tech giants pay too little tax in certain European countries.

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