Tuesday, 30 October 2018 06:27

UK to impose digital services tax on tech giants from 2020 Featured

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UK to impose digital services tax on tech giants from 2020 Pixabay

The UK has become the first country to slug big technology firms with a tax based on revenue, with the Chancellor Phillip Hammond introducing a digital services tax from April 2020 onwards.

Hammond said established technology companies, rather than start-ups, would have to to pay the tax, the BBC reported.

The European Commission, in March, suggested that a blanket 3% tax be applied on digital companies that had annual worldwide revenues of €750 million (US$925.6 million) and EU revenues of €50 million.

The OECD has also been trying to reach a consensus among its 36 member countries on a similar tax.

Last week, German Finance Minister Olaf Scholz said he backed a global minimum fiscal regime for multinationals.

And Australia's Treasury has floated a similar idea which the Federal Government is said to be considering.

The UK tax was announced in the budget. Hammond said: "It is clearly not sustainable or fair that digital platform businesses can generate substantial value in the UK without playing tax here."

And he added that the tax would be levied only on companies that were profitable and generated at least £500 million annually in global revenue.

The tax will be reviewed in 2025.

The Australian Treasury proposal was enough to worry Google to the extent that its chief economist Dr Hal Varian made a trip to the country a fortnight back.

Australia has wrestled with the tax avoidance practised by big technology companies like Microsoft, Apple, Google, Facebook and Amazon for some time.

The BBC quoted Dan Neidle, a tax partner at law firm Clifford Chance, as saying that the tax move could annoy the US Government.

"Given the dominance of the US tech giants, it is hard to see the Trump administration taking kindly to the digital sales tax as the UK sets out its stall for the best possible trade deal with the US," he said.

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Sam Varghese

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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