Britain Targets Tech Giants with their New Digital Tax

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Britain, in a statement, said that in order to update the system to keep in pace with the digital business models, it would tax the revenue from online platforms such as GoogleFacebook, and Amazon. Amazon has been a six-month low, down at 9 percent, Google has been down by 5.5 percent, and Facebook has been trading at 3.5 percent down. Netflix stock has been 8 percent down, and Apple stock has been 3.6 percent low.

The finance minister Philip Hammond, during his annual budget speech on Monday, said- “It’s clearly not sustainable, or fair, that digital platform businesses are able to generate substantial value in the UK without having to pay tax here in respect of that business. The tax will be designed to ensure that established tech giants (FAANG), rather than start-ups, shoulder the burden of these tax.”

The Treasury added that profitable companies will be taxed at 2 percent on the revenue they make overall from UK users from April 2020, and this is expected to increase by more than GBP 400 million ($512 million) a year. After this, the tax will be based on the company self-assessing itself.

Hargreaves Lansdown analyst Laith Khalaf said thus- “A tax take of 400 million pounds or so might seem a small number when you consider that Amazon alone is expected to post sales of $233 billion (roughly Rs. 17 lakh crores) this year. But the worry for these tech giants and their shareholders is that a pebble will start an avalanche of taxes from international governments.

Big Internet companies which claim to follow tax rules previously paid little tax in Europe by channeling their sales via countries such as Ireland and Luxembourg which have fewer tax regimes. But Google and Facebook have changed their way of accounting their actions in Britain.

Since 2016, Facebook recorded its revenue from the UK customers who supported the local sales teams and subjected the taxable profit directly to UK corporation’ income.

Hammond added- “This tax will target platforms like search engines, social media, and online marketplaces and it will be paid by companies that generate at least 500 million pounds a year in global revenue. Britain had been attempting to bring about reform in the international corporate tax systems,  but progress has been painfully slow, and governments are taking forever to talk simply.”

Clifford Chance tax partner Dan Neidle said – “The radical nature of the proposal clearly indicated that Britain has become frustrated with the slow pace of the change with respect to global tax laws. The UK is running ahead of every other country except for Spain.

But the dominance of US tech giants and President Donald Trump’s administration might not appreciate the proposal at this point in time when Britain agrees to new trade deals. In March, the European Commission proposed that EU states will charge a 3 percent levy on digital revenues of large firms such as Google and Facebook.

But this plan was opposed to by smaller states such as Ireland and Nordic governments since it fears losing its revenues and thinks that the tax might stifle innovation and trigger retaliation from the United States which is home to the firms which could be potential members to be hit by the proposed tax.

France has been seen supporting a new levy, and last month, it put forward the idea that such a tax might have a “sunset clause,” which means that the tax would see an end when a global solution has been found.

On Monday, Hammond said- “If a global solution emerges, Britain might have to consider adopting this instead of its levy.

Amazon and Netflix declined to comment, but Facebook said that it is looking forward to receiving more details about the proposals, and before that, it would be too early to comment.

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