Online giants such as Google, Facebook and Amazon will be subjected to new tax laws announced by the Chancellor of the Exchequer Philip Hammond in yesterday’s budget.
The two per cent tax on these kind of digital behemoths will be imposed as a means of levelling the playing field between online shopping destinations and high street names, the kind that in recent months have taken a hammering.
The Treasury said profitable companies would be taxed the two per cent on the money they make from UK users from April 2020, a measure that is expected to raise more than £400 million a year.
The new tax law will be the first time giants like Google and Amazon will have revenue taxed.
“It’s clearly not sustainable, or fair, that digital platform businesses can generate substantial value in the UK without paying tax here in respect of that business,” said Hammond in his annual budget speech this week.
The move is one to update a system that has so far not kept pace with changing digital business models. However, it has been met with arguments on either side, with some start-ups fearing that without procedural reform to the system itself, the new tax law could see them fall foul to rules built for those bringing in the revenue akin to the world’s giants.
On top of this, concerns have been voiced over how the US will view the move by the UK at a time when Britain is trying to agree new trade deals.
The European Commission proposed in March that EU states would charge a three per cent levy on digital revenues of large firms like Google and Facebook.
The plan is opposed by smaller states like IReland, which fears losing revenues and by Nordic governments which think the tax could stifle innovation and trigger retaliation from the US.
Hammond added to his speech that if a global solution emerges, Britain would consider adopting this instead of its levy.
However, he said that the government would consult on the detail to make sure it got its plan right, and then ensure Britain remained one of the best places to start and scale up a tech business.
Meanwhile, hammond has confirmed plans to spend £1.5 billion on the UK’s high streets as part of the Autumn Budget. The funding comprises £900 million in business rates relief for nearly 500,000 small businesses, plus £650 million for the transformation of high streets, transport and infrastructure.
The new package is aimed at helping small town retailers and high street businesses, with Hammond announcing business rates relief for its firms with a rateable value of less than £50,000 will be cut by a third.
“The high street lies at the heart of many communities and it is under pressure as never before,” he said.
“If Britain’s high streets are to remain at the centre of community life, they will need to adapt. Today, we support them to do so.”
British Retail Consortium chief executive Helen Dickinson, said: “While we welcome the temporary support being given to small businesses, these measures alone are not sufficient to enable a successful reinvention of our high streets.
“Retailers are currently in the midst of a perfect storm of factor – technology changing how people shop, rising public policy costs and softening demand. Rather than tinkering around the edges, struggling high streets require wholesale reform of business rates in order to thrive. The issue remains that the business rates burden is simply too high.”