The UK government has announced a new "digital services" tax of two percent that it plans to start levying on the UK revenues of tech giants like Amazon, Google and Apple based on the money they make on digital services like advertising and streaming entertainment (but not online sales). For example, Amazon paid $2.2 million in United Kingdom taxes previous year on revenues of $2.5 billion. The digital services tax will be paid by companies that are profitable, he said, and making at least £500 million ($640 million) per year in global revenues. A new global agreement is the best long-term solution.
Speaking of Mr Hammond's decision to take advantage of last-minute improvements to borrowing forecasts by the Office for Budget Responsibility (OBR) to fund increased spending on the NHS, Mr Johnson said: "Now we know".
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Hammond added that the tax will be "carefully designed" to ensure it targets established tech giants - rather than tech start-ups.
"The measure will also include a safe harbour provision that will allow businesses with very low profit margins to make an alternative calculation of their tax liability", the OBR document points out, although the details of this alternative calculation are not clear at this moment.
The tax is projected to yield £5 million in 2019/20, but will steadily increase to around £440 million in 2023/24. But while local governments can impose a sales tax on physical goods in shops and restaurants that has not been the case with online service providers.
"If you think, in many ways, about Brexit, Trump, the new Italian Government - as they call it the populist revolt - much of this is about ordinary, decent, law-abiding, tax-paying folks saying 'something really wrong, something unfair has happened in society'".
Will It Affect Me When I'm Buying Goods Online?
The rise of online shopping has been a major focus for critics of the existing tax system in recent months, with the likes of Tesco boss Dave Lewis calling for a level playing field between online and bricks-and-mortar retailers. A parliamentary inquiry in 2012 expressed its dismay towards large tech corporation of their tax evasive behavior.
It says that the tax will raise £275 million in its first year.
This means digital services such as Amazon, Facebook, and Google are likely to fall into this category.
And even without a governmental response, serious consideration should be given to the global tech giants' threats to alter their strategy following Brexit.
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