UK proposes targeting tech giants with 'digital services tax'

UK proposes targeting tech giants with 'digital services tax'
© Getty Images

The UK on Monday announced that it would be moving forward with a new digital services tax targeting tech giants.

Large internet companies will have to pay 2 percent of revenues they earn from UK users over the web starting in April 2020.

Philip Hammond, the UK’s Chancellor of the Exchequer, said in a speech to parliament that the proposal will only be aimed at larger tech platforms.

“It will be carefully designed to ensure that it is established tech giants rather than our tech startups, shoulder the burden of this new tax,” Hammond said. “The digital services tax will only be paid by companies that are profitable and which generate at least 500 million pounds a year in global revenues.”

Similar proposals are being explored by the Organization for Economic Cooperation and Development (OECD) and the EU, as European countries grow frustrated over internet platforms largely escape taxation despite a large digital presence in their countries.

Hammond on Monday said that the UK would work with intergovernmental bodies and consider adopting any proposal they come up with instead of the tax the UK put forward.

The tech industry, largely based in the U.S., has opposed European efforts to implement a digital sales tax.

Jose Castaneda, a spokesman for the Information Technology Industry Council, a trade group representing U.S. tech giants, urged the UK to scrap its plans for the new tax.

“It is disappointing that a digital service tax is included in the United Kingdom’s budget proposal,” Castaneda said in a statement. “Imposing a digital tax could create a chilling effect on investment in the U.K. and hinder businesses of all sizes from creating jobs.”

Treasury Secretary Steve Mnuchin also spoke out last week about his “strong concern with countries’ consideration of a unilateral and unfair gross sales tax that targets our technology and internet companies.”

“A tax should be based on income, not sales, and should not single out a specific industry for taxation under a different standard,” Mnuchin said in a statement on Thursday.

But Hammond, a member of the UK’s governing Conservative Party, on Monday seemed determined to tax Big Tech.

“It is only right that these global giants with profitable businesses in the UK pay their fair share towards supporting our public services,” he said.