What you need to know about Britain’s "Digital Services Tax"


The days of Google, Facebook and Amazon dominating markets without paying back considerable amounts in tax could be over, thanks to the government's proposed digital services tax.

According to the finance minister, the tax will be created to ensure that established tech giants and not startups were shouldering the burden.

The U.K. government today announced plans to levy a "digital services tax" on major tech firms that could add up to hundreds of millions of dollars per year. The chancellor told MPs that tax "rules have not kept pace with changing models", and that the current set-up allows online firms that generate significant revenue in the United Kingdom to pay minimal tax in this country.

Speaking in the Commons on Monday, Philip Hammond said: "A new global agreement is the best long term solution".

"Income tax is devolved and raising the higher rate threshold should not be a priority for the Scottish government, we need a distinctive tax that meets the needs of the people of Scotland".

This is the tricky aspect of the new tax; how do you hold the internet giants accountable within placing too much of a burden on the start-ups?

Online companies like Amazon have always been criticised for not paying enough tax despite receiving millions of pounds' worth in Government contracts each year and enjoying a boom in profits.

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Around 32 million Britons will be given an income tax cut as Mr Hammond announced that promised increases in the tax-free personal allowance will happen in April 2019 rather than 2020.

Scottish Conservative interim leader Jackson Carlaw said: "With tax cuts being delivered south of the border, the case for yet more SNP tax rises next year in Scotland is simply unsustainable". Such a tax would fall on consumers of those goods-and that is not our intention.

"Everything is overshadowed by the damaging impact that Brexit will have on the UK's public finances and the skilled workers available to run public services".

But lead opponent Ireland says a growing number of countries are grumbling about hidden problems with the tax, including that it could inadvertently snag European companies.

This 2 percent compares differs to the 2 to 6 percent of turnover tax that had been mooted previously by French economy minister Bruno Le Maire.

The expected move follows a heated row in Labour ranks after Mr McDonnell said the party would not oppose Tory tax cuts for the middle class.

"Fiscal Phil" has targeted online tech giants by announcing a new digital services tax in his Budget, promising to "deliver global corporate tax reform for the digital age".