Ham­mond plot­ting new tax on Google and Face­book

The Sunday Telegraph - Money & Business - - Front Page - By Han­nah Boland

THE Trea­sury is draft­ing plans for a new dig­i­tal tax on ad­ver­tis­ing rev­enues in a Bud­get move that would ham­mer Face­book and Google, but leave Ama­zon rel­a­tively un­scathed.

The Sun­day Tele­graph un­der­stands that Chan­cel­lor Philip Ham­mond’s so-called “dig­i­tal ser­vices tax”, mooted in a speech to the Con­ser­va­tive Party Con­fer­ence last week, could tar­get the rev­enues US tech gi­ants gen­er­ate from ad­ver­tis­ing in the UK.

Trea­sury of­fi­cials are ex­am­in­ing dif­fer­ent ways to levy a new dig­i­tal tax but are cau­tious about hurt­ing Bri­tain’s wider tech start-up in­dus­try.

The Trea­sury is ex­trap­o­lat­ing how much value com­pa­nies gen­er­ate from UK users and try­ing to make sure tax is paid on that value.

The pre­ferred op­tion is to as­sess tech com­pa­nies’ ad­ver­tis­ing rev­enues and how many eye­balls are see­ing those ad­verts in the UK, sources said.

Mr Ham­mond is ex­pected to lay out the pro­pos­als in the Bud­get on Oct 29, although if a wider in­ter­na­tional deal can be struck with the IMF this month those plans may be pulled.

In his speech in Birm­ing­ham, Mr Ham­mond said that: “Global in­ter­net gi­ants must con­trib­ute to fund­ing pub­lic ser­vices”.

The Trea­sury be­lieves a tax on ad rev­enue is one way it can tar­get Face­book and Google. In 2017, Google and Face­book gen­er­ated £4.4bn and nearly £2bn in UK ad­ver­tis­ing rev­enue, ac­cord­ing to in­dus­try an­a­lysts. Google paid £50m in UK tax.

It emerged this week­end that Face­book’s cor­po­ra­tion tax bill had in­creased to £15.8m, up from £5.1m, ac­cord­ing to its lat­est ac­counts. The so­cial net­work­ing gi­ant’s prof­its at Face­book UK Ltd in­creased from £58.5m to £62m. Its re­ported rev­enues of £1.27bn only ac­counted for ad­ver­tis­ing sales to larger UK cus­tomers and not its to­tal in­come from show­ing ad­verts to Bri­tish users.

Face­book’s main in­ter­na­tional rev­enues had pre­vi­ously been booked in Ire­land, although the com­pany has since be­gun to re­port more of its in­come in the UK.

A White­hall source said the new tax “would be more in the space of the Googles and the Face­books, and less in the space of Ama­zon”.

The dis­cus­sions come as the IMF is scram­bling to forge a com­mon tax pol­icy for tech com­pa­nies that record sales and prof­its across ju­ris­dic­tions.

Any UK tax on the tech gi­ants is likely be wel­comed by many smaller Bri­tish busi­nesses but the struc­ture of the tax could pre­serve Ama­zon’s re­tail dom­i­nance.

Although the re­tailer gen­er­ates some rev­enue from ad­verts, the UK fig­ure last year was in the low hun­dreds of mil­lions of pounds – far less than Google and Face­book. In to­tal Ama­zon made just un­der £2bn in the UK last year, pay­ing £4.6m in tax.

Mr Ham­mond is thought to have back-ped­alled on ear­lier pro­pos­als for a sep­a­rate on­line sales tax, branded the “Ama­zon tax”, amid con­cerns it would hurt con­sumers who would have to pay more for goods.

Sources con­firmed that it was un­likely there would be more than one dig­i­tal tax in the Bud­get.

Ger­ard Grech, chief ex­ec­u­tive of Tech Na­tion, warned that the tax “could be used to dis­crim­i­nate against cer­tain larger com­pa­nies who may then de­cide to pass on those costs”.

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