News | Published December 04 2019

Johnson supportive of future tech tax

Prime minister Boris Johnson has said that he would support implementing a digital sales tax in the UK, adding that large online companies need to make a “fairer contribution”.

Speaking on Tuesday, Johnson said: "On the digital services tax, I do think we need to look at the operation of the big digital companies and the huge revenues they have in this country and the amount of tax that they pay.

"We need to sort that out. They need to make a fairer contribution.”

Multinational corporations such as Google and Facebook have come under fire for paying minimal tax in some countries in spite of their large revenues, due to legal loopholes in how profits can be reported. A wider solution is being discussed, but some countries are looking to implement interim tax measures, hence the proposed UK tech tax.

Jeremy Corbyn’s Labour is also pursuing tax measures for multinational companies, targeting “Amazon, Facebook and Google” explicitly in a press release outlining the party's tax policy.

The Conservatives' digital sales tax plan, first mooted in 2018 by former chancellor Philip Hammond, would see large digital companies pay a tax of two per cent on the value of UK sales starting from April 2020, the beginning of the next financial year. A promise to enforce it is included in the Conservative election manifesto.

It is estimated to have the potential to raise around £500 million per year initially, but is likely to be met by opposition from the US after president Donald Trump aired discontent over a similar measure being implemented in France.

The French state is set to impose a tax of three percent on any digital company whose revenue exceeds €750 million [$850 million; £670 million], should a minimum of €25 of that revenue be made in France. The measure will be backdated to 2019 and is expected to impact digital giants such as Amazon, Google and Facebook.

This prompted a warning from Trump that he would apply tariffs to French goods coming into the States in response.

Ahead of this week’s NATO summit, Trump said: “We’ve taxed wine and we have other taxes scheduled.

"We'd rather not do that, but that's the way it would work. So it's either going to work out, or we'll work out some mutually beneficial tax.”

Washington has threatened to impose tariffs of up to 100 per cent on $2.4 billion [£1.8 billion] of French products, including cheese, champagne and luxury items, raising concerns that other countries looking to introduce similar measures could be met with similar treatment.

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Authored by

Scott Challinor
Business Editor
December 04 2019

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