Now tech sector will pay their fair share
IN one of the more tasteful jokes of his Budget speech, Philip Hammond quipped that he’s looking forward to a call from the former leader of the Lib Dems. No doubt Sir Nick Clegg, newly appointed spin doctor-in-chief at Facebook, will be keen to persuade Hammond to water down his new tech tax.
Joking aside, the Chancellor should turn a deaf ear to any such blandishments. For Mr Hammond deserves the thanks of every taxpayer in Britain for having the guts to take on the powerful Silicon Valley giants who have prospered so richly in this country. Never have companies made so much from so many, while paying so little in tax.
Some critics doubted whether Hammond would dare to take even the first step in ending the ridiculous situation where gigantic American online businesses make billions here, but make next to no contribution to our society.
He has proved those doubters wrong. Under the existing system, the tech behmoths have been paying puny sums in UK corporation tax. Amazon UK’s bill was just £4.67million last year while the latest tab for Sir Nick’s paymasters at Facebook was a derisory £15million.
These sums are, when set against the multi-billion revenues they have racked up, patently pathetic. So Hammond’s move to raise more than £400million a year through a 2 per cent tax on revenues, starting from April 2020, is a first step to righting an obvious wrong.
True, amounts of £400million or so a year are small in the context of the needs of, say, the NHS, but they are a lot more than the Exchequer receives from tech companies now – and more importantly, they are a major move in the right direction.
The tech tax is not, as the digital giants and their cheerleaders try to argue, an anti-business measure: it is a matter of simple fairness.
AMAZON, Facebook et al have changed our lives and brought benefits including creating thousands of jobs. But in making profits here, they have availed themselves of our public assets: our transport infrastructure, our legal system, our education and health provision that look after their staff.
Bricks and mortar businesses contribute to these benefits, and so should the digital operators.
One pitfall is a digital services tax, clumsily implemented, could harm smaller tech firms and innovative start-ups, so Hammond took steps to make sure this doesn’t happen. His measures will apply only to groups that generate global revenues from search engines, online selling and social media of more than £500million a year.
The Budget is short on detail but the tax is likely to be levied based on the share of revenues the companies make in this country.
The digital levy also goes some way towards levelling the playing field between online retailers such as Amazon and traditional retailers which have been suffering from cut-throat competition and a skewed playing field on tax.
Coupled with a package of help for the High Street, the tech tax brings real hope for revitalising struggling town centres and malls.
The business rate bills shouldered by the likes of ailing Debenhams – which has reported record losses of nearly £500million and plans to close 50 stores – are in stark contrast to the much smaller amounts Amazon pays on its buildings.
Many small independent retailers have been under huge strain. South of the Border, bills will be cut by a third on properties with a rateable value of less than £51,000, which covers nine out of ten premises, for two years starting next year.
There will also be 100 per cent business rate relief on public lavatories which gave rise to a string of puerile puns but is still a good idea. The Scottish Government would do well to take notice.
The contrast between the booming online economy and the distress afflicting many High Streets could not be more jarring. Even middle class stalwarts such as John Lewis have seen profits dwindle.
Hammond has listened to the retailers and been particularly courageous with his tech tax, deciding to act alone, rather than in concert with finance leaders from the EU and other large economies.
He would certainly have preferred to bring in reforms alongside other nations, simply because Amazon, Facebook and their cohorts are global corporations and making them pay a decent amount of tax requires unified action worldwide.
Discussions internationally continue, but as he said, progress is painfully slow. ‘We cannot simply talk forever,’ he declared. Quite.
He may run into complications by sticking his neck out but the hope is that now he has taken the lead, others will follow.
The US digital giants provide services most of us want, and they have brought welcome investment and jobs to this country. Now it is time they paid a fair share of tax.