As of today, the UK government will introduce a digital services tax to collect two per cent of revenue generated by companies such as Amazon.
Although it was not mentioned during Chancellor Rishi Sunak’s Budget speech, the government confirmed the tax will be introduced on April 1.
HM Revenue and Customs said it could result in as much as £515 million in additional annual income by the end of the 2025 financial year.
The tax is expected to impact “large multi-national enterprises with revenue derived from the provision of a social media service, a search engine or an online marketplace to UK users”.
Among these companies, Amazon has often been criticised for paying very little tax on the large revenues which it generates in the UK.
Meanwhile, businesses will be liable for the tax when worldwide revenue from digital activities is more than £500 million and over £25 million of this revenue comes from UK users.
In July 2019 France has passed a controversial tax on “digital services”. Under the bill, just passed by the French Senate, tech companies with more than €750 million in global revenue and €25 million in French revenue would be required to pay a 3 percent tax on total annual revenue generated by providing services to French users. That would include companies like Facebook, Google, and Amazon. In response, US President Donald Trump threatened to impose duties of 100% on the import of goods of French origin. As a result, in January it was announced that the collection of this tax was suspended until the end of 2020.
In this regard, UK experts were concerned that the introduction of such a fee could provoke Washington.
Steven Mnuchin, the US Treasury secretary, warned in Davos that plans by other European countries, including the UK, would have serious repercussions if they did not back down. “They’ll find themselves faced with President Trump’s tariffs. We’ll be having similar conversations with them,” he said.