Government to introduce 2% digital services tax in 2020

Marcus Newton
November 1, 2018

As part of the Autumn Budget, Philip Hammond said a 2% United Kingdom digital services tax will come into force in April 2020 and is expected to raise £400 million a year.

Tech companies that generate more than £500 million a year in global revenue will be the targets.

The new "digital ad tax" will come in to force in April 2020 and the levy will be charged at a rate of 2% and only apply against revenue from search engines, social media platforms, and online marketplaces, affecting tech giants such as Facebook, Amazon, and Google.

The announcement came as Hammond splashed out on health services in a spending plan signalling the easing of eight years of austerity with a modest uplift in public spending and few major tax increases.

Johnson outlined in a separate newspaper article for London's Evening Standard that the figures behind Hammond's Monday Budget, which saw him spend lavishly on healthcare, would "go out of the window" in the event of a British exit from the European Union (EU) with no deal over trade and tariffs.

"Facebook is massive in this country, it earns huge advertising revenues and yet the singer Ed Sheeran paid more tax past year than Facebook did". This "Google tax" will come into effect in April 2020 and like the regulation introduced within the gaming industry is created to profit from the shift to online commerce. He said that while a global agreement on how digital taxes shall be implemented would be an ideal solution to the issue, talks at a global level have been slow.

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He also said prisons, schools and local authorities would not have much to celebrate about the new budget and should be preparing for more hard years ahead.

Will It Affect Me When I'm Buying Goods Online?

The tax would only apply to profitable companies, but could be abolished if members of the Organisation for Economic Co-operation and Development (OECD) can agree a formula for taxing internet giants.

"For 100 years, businesses have been taxed based on where they are, not where their customers are", he said.

However, the government could face a backlash from the U.S. government over a tax that would appear to exclusively target USA companies.

With control over income tax rates and bands devolved to Scotland, Mr Mackay said while he would set out his plans for taxpayers north of the border on December 12, he pledged he would "choose a fair, more progressive path" than the Conservative Chancellor. But he said they also challenge the sustainability and fairness of the tax system and provide a clear example of the tax code not keeping up with dynamic business models.

Other reports by MaliBehiribAe

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