CHANCELLOR of the Exchequer Philip Hammond’s promise to introduce a levy on big earning tech companies that pay little tax – marks an interesting change of pace for this current Tory government.
Or so it seems.
In his annual budget, Mr Hammond proposed to make “global giants with profitable businesses in the UK pay their fair share” through a “digital services tax” on revenues, which could be introduced in 2020.
Often perceived largely as a party that will gladly give questionable tax breaks to the very rich, this Tory proposal is aimed at companies with annual global revenue of more than £500m.
That means the likes of US big hitters Amazon, Google, eBay and Facebook.
There is certainly a perception in the UK that, while smaller local firms get stung for taxes, the larger corporations, particularly the tech ones, pay peanuts or less, often thanks to gaping loopholes.
This line of attack was used throughout the last General Election by Jeremy Corbyn’s Labour to attack Theresa May’s Conservatives and their stance on tax.
The digital sales tax is, however, facing stiff opposition and could be far too good to be true, anyway.
Google UK has warned the Chancellor to stick to his promise that the new tax would only be a stopgap while a long-term internationally agreed standard for taxing digital companies is drawn up.
The Organisation for Economic Cooperation and Development (OECD) advises on international taxation and is beavering away on just such a system.
But a global solution is not favoured by some, including US president Donald Trump – with his country home to many of the world’s tech giants.
Plus, ironically, considering the never-ending Brexit negotiations, the UK and EU are getting annoyed at how slow OECD is moving and have come up with their own versions.
Hence, Mr Hammond’s proposal this week, while Brussels wants an EU-wide digital services tax of three per cent of revenues – and the latter has even been criticised by smaller tech firms as they fear it will actually damage their revenue.
Mr Hammond’s plan will also only come into force if the global solution can’t be reached in the next 12 months – so could simply be an attempt to tread water anyway, allowing the government to sit tight while it fumbles over Brexit.