Chancellor likely to confirm new taxes for digital giants

HM Treasury is considering imposing an extra tax on tech giants like Amazon, Facebook, Google's Alphabet and Apple on their revenues rather than their profits because they are not so easy to shift from one jurisdiction to another.

Chancellor Philip Hammond is expected to announce this new measure in a speech next month as a conclusion to the Treasury’s analysis on how to create a fair tax system for online firms.

The consultation began due to fears that these digital companies don’t pay enough taxes after a series of scandals reached the media.

Mel Stride, the financial secretary to the Treasury, told the BBC that companies should pay a fair level of tax regarding the significant profits they’re generating,

“At the moment they are generating very significant value in the UK, typically through having a digital platform with lots of users interacting with that platform.

“That is driving a lot of value, so you’re looking at social media platforms, online marketplaces, internet search engines – where at the moment the tax regime is not taxing those activities fairly,” said Stride.

Recently Facebook announced a global tax overhaul and planned to move its revenue base from Ireland and begin booking advertising locally in every country where it operates. This move was a response to criticism from the EU that complained it wasn’t paying fair taxes and was using the Irish subsidiary to shift profits.

Last week a report from the Royal Society of Arts advised the UK government to increase tech giant’s taxes to provide a universal basic income of £10,000 for every UK citizen under 55.

The taxes on tech giants would apply to those companies like Facebook or Apple that make vast profits accessing UK resident’s data.

Last year, the European Commission launched a review of the tax practices of large overseas tech firms as it estimated many were paying just half of traditional rivals.

“The underlying principle for corporation tax is that profits should be taxed where the value is created. However, in a digitalised world, it is not always very clear what that value is, how to measure it, or where it is created,” a statement from the Commission said.