News | Published January 22 2020

OECD urges UK to hold fire on tech tax

Speaking at the World Economic Forum in Davos, the Secretary General of the OECD has urged to the UK to hold off on its planned tech tax.

The new tax, which would levy a two per cent tax on the UK revenues of search engines, online marketplaces and social media companies, was due to be introduced in April. Sajid Javid, the Chancellor of the Exchequer, predicted the tax could raise £500 million.

In his speech, however, Angel Gurria, the Secretary General of the OECD, urged the UK government to “absolutely hold fire and contribute to a multilateral solution.” 

Gurria argued that unless a global solution could be found to ensure technology companies pay their fair share of tax, the implementation of different tax regimes in different countries would lead to a “cacophony and mess” and lead to “tensions rising all over the place.”

In response, the Treasury said: “We’ve committed to introduce our Digital Services Tax from April 2020. It will be replaced once a global solution is in place.”

A variety of European countries have been considering implementing new taxes on multinational technology firms, ensuring they are taxed in the places they generate revenue rather than where they have their European headquarters.

In January, France was forced to pull back from its planned implementation of a three per cent tax on the revenues of the largest technology companies, which would have to be paid twice a year. Only companies with revenues of over £21 million in France, and €750 million worldwide, would be affected. 

France agreed to postpone the implementation of this tax until the end of 2020 after the US threatened to impose £1.8 billion of retaliatory tariffs.

Despite the OECD’s warning, the heads of major technology companies have responded positively to the introduction of new tax arrangements. Brad Smith, the president of Microsoft, told the BBC that “it does make sense for big tech companies to pay appropriate taxes.”

This sentiment was echoed by Tim Cook, the chief executive of Apple, who called for a global solution.

In September, the Times reported that Amazon currently pays £220 million in direct taxes, despite total revenues from the UK market of £10.9 billion. This amounts to two per cent of its total revenues, although the majority of this taxation bill was made up by employer taxes.

According to the BBC, in 2018, Google paid £49.3 million in corporation taxes. The total value of Google’s sales in the UK is roughly £5.7 billion a year.

The implementation of a Digital Services tax was first raised by former chancellor Philip Hammond in October 2018. 

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Authored by

George Salmon
Political Editor
January 22 2020

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