UK announces ‘digital services’ tax on tech giants – here’s what you need to know

Technology companies will have to pay a 2% digital services tax, from April 2020, the Chancellor of the Exchequer announced in the budget on Monday. 

The likes of Google, Facebook, Amazon and Apple will pay the new levy on income from advertising sales and streaming services, rather than online sales of goods. The chancellor says the tax is expected to add an extra £400m a year to the Treasury’s coffers.

During his budget speech to Parliament, Chancellor Philip Hammond said tax rules have not kept pace with the digital economy, but the new digital sales tax will help to redress the balance.

He said: “The rules of the game must evolve now if they are to keep up with the digital economy.

“Digital platforms delivering search engines, social media and online marketplaces have changed our lives, our society and our economy, mostly for the better. They also pose a real challenge for the sustainability and fairness for our tax system… the rules have not kept pace.”

Those campaigning for tech giants to pay their fair share of tax are unlikely to be pleased that the likes of Amazon will not be required to pay more on online sales. In August, it was revealed Amazon paid just £4.6 million in corporation taxes for its 2017 earnings. That was a dramatic fall from the previous year’s contributions of £7.4m.

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That’s despite the company’s UK profits almost trebling to £72.4m, from £24.3. Amazon has said it pays all of the tax owed in the UK. Following the publication of the figures, Hammond hinted an ‘Amazon tax’ might be forthcoming to level the playing field for the high street, but that hasn’t been forthcoming.

He said: “We want to ensure that the high street remains resilient, and we also make sure that taxation is fair between business doing business the traditional way, and those doing business online. We may have to look at temporary tax measures to rebalance the playing field until we can get international agreements sorted out.”

Do you think the measures announced today are fair? Or should tech giants, whose profits are largely declared abroad, be held to account for online sales too? Let us know@TrustedReviews on Twitter.