Row brew­ing in White­hall over dig­i­tal ser­vices tax

Re­ports have claimed the levy on tech giants could be dropped as it is hold­ing up trade talks with the US

The Daily Telegraph - Business - - Front Page - By Matthew Field

A DE­BATE is rag­ing within White­hall over the fu­ture of the Gov­ern­ment’s tax on tech giants amid claims the levy could be scrapped.

The Trea­sury rushed to pour cold wa­ter on claims that it plans to dis­card the dig­i­tal ser­vices tax af­ter re­ports over the week­end.

The tax would re­sult in tech giants Face­book and Ama­zon be­ing charged 2pc on rev­enues de­rived in the UK from search en­gines, so­cial me­dia web­sites and on­line sales.

An­nounced by Philip Ham­mond, the for­mer chan­cel­lor, and in force since April 1, the tax ap­plies on rev­enues over £25m for com­pa­nies with more than £500m in sales world­wide.

The Mail on Sun­day claimed the tax was about to be ditched af­ter it be­came “more trou­ble than it’s worth” in negotiatio­ns with United States trade of­fi­cials and risked an­ger­ing Don­ald Trump, the US pres­i­dent.

But Gov­ern­ment in­sid­ers pushed back on the re­ports. One source fu­ri­ously claimed they were “rub­bish”.

The dig­i­tal ser­vices tax is ex­pected to ul­ti­mately raise £500m per year from tech giants af­ter years of com­plaints that they book their prof­its from sales or ad­ver­tis­ing in the UK over­seas.

How­ever, the tax has been crit­i­cised by Amer­i­can of­fi­cials who see it as puni­tive. The US threat­ened re­tal­ia­tory tar­iffs on France for its planned dig­i­tal tax, which led to it be­ing de­layed.

The UK is ex­pected to re­voke its dig­i­tal tax if an in­ter­na­tional plan is agreed with other na­tions, al­though the US has ex­pressed frus­tra­tion over negotiatio­ns at the OECD.

There are also con­cerns that dig­i­tal taxes could ul­ti­mately end up be­ing passed on to con­sumers and small busi­nesses. Ear­lier this month, Ama­zon an­nounced that from Sept 1 it would pass the cost of the dig­i­tal ser­vices tax on to sell­ers us­ing its plat­form.

The Mail on Sun­day re­ported the tax had emerged as a “stum­bling block” in talks be­tween US ne­go­tia­tors and the UK team, which is led by Liz Truss, the Trade Sec­re­tary.

Ge­orge Turner, of think tank TaxWatch, said he would be sur­prised if the Trea­sury per­formed a U-turn on the dig­i­tal tax. He said: “Po­lit­i­cally, tax avoid­ance is hated by the public. The Trea­sury has been gung-ho about the tax even as other coun­tries have rowed back on it.

“At a time when we are get­ting talk from many peo­ple in the Trea­sury that tax rises are com­ing, if peo­ple are to ac­cept higher taxes they will want to know com­pa­nies are be­ing taxed fairly.”

He added the OECD had so far failed to come up with a com­pro­mise.

In June, the Chan­cel­lor wrote to US Trea­sury Sec­re­tary Steve Mnuchin, along with fi­nance min­is­ters from France, Ger­many and Italy, de­mand­ing US tech giants “pay their fair share of tax”. Mr Mnuchin had warned talks with other coun­tries were at an “im­passe”.

Be­cause of the success of dig­i­tal re­tail sales dur­ing the pan­demic, the Trea­sury is also look­ing at a sep­a­rate tax on on­line sales.

A Trea­sury spokesman said: “We’ve been clear the dig­i­tal ser­vices tax is a tem­po­rary tax that will be re­moved once an ap­pro­pri­ate global solution is in place – and we con­tinue to work with our in­ter­na­tional part­ners to reach that goal.”

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.