29 October 2018
Zubin Patel, corporate tax partner at Deloitte, comments:
“The Chancellor has planted a stake in the ground by announcing plans to increase the level of taxation from companies which operate in the digital economy from April 2020. While the Chancellor has made it clear that the UK’s preference is for this issue to be addressed through global agreement, in the absence of such consensus, the Chancellor is prepared for the UK to act unilaterally in relation to taxing companies which derive material revenue from the digital economy.
“The proposal would apply a Digital Services Tax (‘DST’) of 2% on digital revenues from UK users which arise from search engines, social media platforms and online marketplaces. The DST will only apply to businesses which are profitable and which generate more than £500m a year in global revenues from these activities. The measure is estimated to raise £1.5 billion of tax over four years. There will be further consultation on the detail of the proposal, which is temporary and subject to formal review in 2025.
“There is broad consensus that a global solution to the taxation of the digital economy would be the only way of creating a long term, sustainable position. However, a number of countries have become concerned at the length of time it is taking to reach agreement and, following the example of Spain and Italy, the UK is now seeking to introduce a DST unilaterally unless international agreement is reached.”
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