Chancellor Philip Hammond has outlined plans for the UK’s new digital services tax, which should come into force next year and target tech giants such as Google, Amazon and Facebook. But the move, announced in last October’s budget following growing complaints regarding the perceived low levels of tax paid by these companies, risks sparking a furious reaction in the US. Giles Derrington, head of policy at trade body Tech UK, warned Mr Hammond may be putting the country “at risk of retaliation from the US government that would hurt British businesses and consumers.”
British industry groups have also warned the tax could harm the UK’s businesses more than the ones in the Silicon Valley.
Mr Derrington continued: “This risks creating an outcome where UK-based tech firms actually end up paying more tax than their international competitors.”
This could happen if British companies were to pay higher levels of corporation tax.
Many UK businesses have voiced their concerns over the new tax, with property portals fearing repercussions, according to the Daily Telegraph.
Not all tech companies, whether from the US or not, would be hit by the manoeuvre, according to a pledge made by Mr Hammond in October, when he said the tax would be “narrowly targeted”.
Streaming services like Amazon Prime, Netflix or Sweden’s Spotify are likely to be exempted.
Companies that “primarily develop or acquire content to display it to customers will naturally not fall in scope of the definitions”, the plans stated.
The Treasury explained it did not need to include a specific exemption for companies that “stream, broadcast or publish media like film or music”.
Amazon and Facebook have often said they pay all the tax required in the UK – respectively £4.6million and £16million.
The push to implement a digital services tax by Mr Hammond follows yesterday’s announcement by France, which set its own digital levy and unleashed Washington’s fury.
As a consequence, the US ordered an investigation into tax proposals and paved the way for retaliatory tariffs against the European Union.
US officials have previously warned the UK that, if it proceeded with its own tax plans, “that will prompt a review of our US tax and regulatory approach to determine what actions are appropriate to ensure a level playing field in global markets”.