UK Rolls Out New “Digital Tax” Aimed at Tech Giants
The UK Government has included brand-new “tech tax” in the country’s 2018 budget as part of financial legislation, announced on 29th of October. The new tax will directly affect the tech giants like Apple, Facebook, Amazon, and Google.
1. The new “UK Digital Services Tax
” attempts to make tech giants pay for their successful efforts to mitigate
tax burdens in the United Kingdom and elsewhere.
2. Back in 2012, companies such as Google, Amazon and even Starbucks located
their firms in Ireland to take advantage of low corporate tax. It was not illegal, but immoral, according to Margaret Hodge, then Chairman of the Public Accounts Committee.
3. The new 2018 budget claims
that the tax would "apply to revenues from those activities that are linked to the participation of UK users." The new tax will only be paid by companies which accumulate at least £500 ($637) million a year in global revenues and is planned to come into effect in April 2020.
4. However, it may not work out. The point is that most of the tech companies don’t receive revenue directly from its users. For instance, when a marketer pays Facebook for showing ads to UK users, the payment transaction doesn’t necessary belong to the UK jurisdiction, hence UK can’t tax it under the new rules of “digital tax.” Even this new tax may not be completely adequate for the modern economy where state borders and jurisdictions are not entirely what they used to be just a few decades ago.