UK plans tax on digital services

The British government has announced plans for a new tax that mainly targets foreign tech companies such as Amazon, Google and Facebook. A similar discussion in the European Union is heading nowhere, so the UK wants to proceed on its own.

 

European discord

The British government's new budget plans include a 2 % tax on the turnover foreign tech giants achieve in the UK, if they are profitable and generate a turnover of over 500 million pounds (nearly 570 million euros). The tax should generate 400 million pounds (450 million euros) of income for the government within two years.

 

Europe has been voicing criticism of large tech companies for a while, as they generate a large turnover in the EU but they only pay minimal taxes as they are established in countries that are fiscally more attractive. As such they form unfair competition for local companies and France and Germany had already expressed interest in a European digitax (also called 'Amazon tax') of 3 %. While there is an agreement on the principle, there is a lot of disagreement on the details.

 

Meanwhile, international rules are being developed within the OECD, but that process is quite slow and British finance minister Philip Hammond seems eager to press the issue forward. Issuing a digitax is controversial as Europe may risk missing out on investments or running behind in digital innovation, and would be very unpopular in the United States.