Press release

Chancellor looks to tax digital businesses in the UK

11 March 2020

Zubin Patel, international tax partner at Deloitte, comments on the Digital Services Tax, which comes in effect from 1 April 2020:

“The taxation of the digital economy continues to be a global challenge and the Government has again made it clear that it is committed to an OECD-led consensus solution to the problem, at which point the Digital Services Tax will be repealed. However, the Chancellor has sent a message to the international community today that he is not prepared to wait for such a solution and is now applying a 2% rate on in-scope revenues which arise from the UK. The Digital Services Tax measure is expected to raise £285m in the first year.

“Significantly, the Government has announced that it will continue to consult on whether the regime should also apply to marketplace delivery fees.

“Consumer behaviour has changed dramatically in line with the development of the digital economy. Capturing revenue has been difficult and the Treasury is keen to ensure that the tax system is modernised to take account of digital developments.

Zubin added:

“In-scope companies will be concerned that the Digital Services Tax may lead to double taxation and will also need to accelerate their preparations for the new tax given how practically complex the calculations are likely to be.

“Companies with digital businesses not currently in-scope will be concerned that they will, in time, drift into the rules as businesses increasingly seek to monetise and build their brands digitally through online platforms and social media features. There is a risk that the measure could result in a short-term squeeze in investment and growth among the UK digital sector.

“Today’s announcement has confirmed the direction of travel, at least for the time-being. But with the OECD looking to establish a global set of rules for digital taxation by the end of this year, the Digital Services Tax could be short-lived.”



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