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Budget 2018: UK goes it alone on digital sales tax for tech giants
UK chancellor Philip Hammond has used today's budget to take aim at tech giants who he says aren't paying their fair share of tax in the nation and is promising to introduce a digital sales levy in 2020 to rectify this.
[...] Hammond said that, as the UK evolves for a digital age, "so too must our tax system to ensure it remains fair and robust" – with the key announcement being on digital tax for tech giants. "There is one standout example of where the rules of the game must evolve now if they are to keep up with the emerging digital economy," Hammond said: digital platforms delivering search engines, social media and online marketplaces. Tax rules have "simply not kept pace with changing business models", he said, adding that it as "clearly not sustainable or fair that digital platforms businesses can generate substantial value in the UK without paying tax here". As such, the UK will, in April 2020, introduce a digital services tax on search engines, social media platforms and online marketplaces.
[...] The move comes as the OECD is trying to thrash out a global agreement on digital sales tax. Hammond – who hinted that the UK might go it alone earlier this month – said a global deal would be the ideal long-term solution, but that progress had been "painfully slow" and that "we cannot simply talk forever". EU member states are also pressing for an interim deal as the OECD deliberates.
The government said it will not be a "generalised tax on online advertising or the collection of data" – and will put a levy of 2 per cent on the revenues that can be attributed to the business models linked to UK-based users.
Companies with global revenue over 500 million pounds will have their local revenue taxed at 2%. I strongly oppose taxing any company's gross revenue. Profit taxes are reasonable, but there are lots of companies that have very thin margins.
Also at The Guardian, FT, The Washington Post, The Hill, MIT, and WSJ.
(Score: 4, Informative) by pTamok on Wednesday October 31 2018, @01:54PM (7 children)
I strongly oppose taxing any company's gross revenue. Profit taxes are reasonable, but there are lots of companies that have very thin margins.
While I am sympathetic to that stance, large corporations (and very rich private individuals) have access to legal and accountancy resources that small companies and the average person does not have access to. As a result many 'tax-efficient' schemes are thought up, often involving transferring assets between jurisdictions, which have a high entry cost to set up, unaffordable to smaller companies and lower net-worth individuals, but which exploit so-called loopholes in taxation regulations to make (local) profits appear artificially small. They are basically gaming the system, to the disadvantage of smaller players. Rather than playing Whac-A-Mole on these schemes, it looks like the UK government is taking a sensible approach that affects only the largest companies that can reasonably be assumed to be taking advantage of such schemes. 2% of local revenue looks to be a very moderate start. If criticised, I'm sure the UK can say something like "I am altering the deal. Pray I don't alter it any further. "
Governments have the power to do as they like in their own local jurisdictions. Companies are not forced to operate in jurisdictions not to their liking.
(Score: 0, Flamebait) by VLM on Wednesday October 31 2018, @02:21PM (6 children)
Its worth pointing out that your plurals are a little distorted in that its not really a "policy decision" as its a mob style shakedown of exactly two companies, Google and Amazon.
Generally people aren't too cool with mobster like shakedowns although policy decisions are somewhat easier to ram thru with some PR, so any discussion of policy in this situation is somewhat disingenuous. Although the policy itself is interesting and worth discussing and you make some interesting points in favor of your side, and its a legit issue outside of this specific context.
The problem with this situation is legitimizing mafia style business practices against corporations seems to justify their own mafia style practices of obtaining political power to retaliate. In the spirit of the old "If they pull a knife on you, you pull a gun on them" this in itself is justification for "they try to implement a protection racket shakedown, you donate millions in bribes to the other candidate at next election". Other than a weak broken window fallacy argument I'm not sure the battle really benefits anyone at all. I guess the net result of this is going to be more legal or illegal money sloshing around in UK elections. I suspect your policy goal was not more election junk mail and telemarketing calls, but that's really all you're gonna get out of this in the end... Kind of like in America in the 30s, having the gin running mobsters and FBI shoot ever bigger guns at each other never really benefited anyone in the long run.
Maybe a SN Las Vegas analogy would be a long ramble law on the merits of taxpayer funded fire protection that is hyper narrowly defined to apply to precisely one casino on the strip, is not really a legit fire safety building code issue, its merely a protection money racket. And the casino in this case is not helpless and is just gonna use its billions to call out a hit on the racketeers in retaliation.
My gut level guess is there's more than two parties to this discussion, so whomever is the runner up to Amazon paid a bribe to this Hammond character to hit Amazon because the runner up wants to screw over the little customer as much as Amazon does now. Its not like kissing up to any of the three parties involved is going to help the little guy in any possible outcome. Voting against Hammond in the next election might help or it might just mean another dude gets "his" bribe next time around. Or more abstractly Hammond is essentially declaring in public "try and audit me cause I got a fat swiss bank account out of this bribe deal"
(Score: 5, Informative) by Whoever on Wednesday October 31 2018, @03:45PM (1 child)
This would not be happening if those same companies had not employed tax avoidance strategies such as the "Double Irish With A Dutch Sandwich". Those companies employ sales people in the UK, who sell to UK-based companies, but somehow the sale is made in Ireland.
(Score: 2) by PiMuNu on Wednesday October 31 2018, @03:53PM
> but somehow the sale is made in Ireland.
Right, what it amounts to is "we don't trust your self-assessment of UK sales, so HMTreasury are going to assess on your behalf (and tax accordingly)"
(Score: 1, Informative) by Anonymous Coward on Wednesday October 31 2018, @03:58PM
Both companies offshore their profits to avoid tax and (because it's done via intracompany loans) there's no direct fix without impacting legitimate foreign investment.
(Score: 4, Interesting) by bob_super on Wednesday October 31 2018, @04:20PM
You have to tax revenue, because companies know how to have no profit in your territory through licensing.
It is a protection racket. Turns out the UK government is protecting the companies from bad actors, and providing justice and infrastructure that the companies rely on for their business. Isn't the current practice of not paying for it just theft ?
The threshold of XXX millions is to avoid putting an excessive burden on the government and smaller companies, bringing in ridiculous revenue compared to the implementation and control costs. I might have put the threshold a bit lower, but you need a threshold (maybe softened to avoid a cliff effect).
(Score: 2) by PartTimeZombie on Wednesday October 31 2018, @07:51PM
Good. They should pay tax in the countries they operate. As several posters have pointed out they endeavour not to through all sorts of dubious means.
(Score: 2) by VLM on Thursday November 01 2018, @11:16AM
To reply to everyone at once, opposition seems to boil down to the UK does not have a functioning criminal justice system, so we'll patch around it in two specific crimes legislatively. Which sounds pretty lame.
Everyone would benefit if their criminal justice system were upgraded to operational status.