Boris Johnson risks Trump’s wrath as Rishi Sunak confirms in the Budget that a 2 per cent ‘tech tax’ targeting online giants Google, Amazon and Facebook WILL be introduced
- The 2% Digital Sales Tax will be introduced on April 1, it has been confirmed
- It will affect search engines, social media services and online marketplaces which ‘derive value from UK users’
- Washington has threatened car tariffs if US firms are forced to pay it
The UK will go ahead with a new tax on tech giants, setting up another potential transatlantic row between Boris Johnson and Donald Trump.
The 2 per cent levy targeting the likes of US firms Google, Amazon and Facebook will be introduced on April 1, it was announced after Rishi Sunak’s first Budget yesterday.
The Digital Sales Tax will affect search engines, social media services and online marketplaces which ‘derive value from UK users’.
It is designed to target businesses who make massive amounts of money from UK consumers put pay little or no tax int he country because they are based abroad – to the detriment of domestic businesses.
It comes despite threats from Washington that the UK would face trade sanctions if it forced American companies to pay the tax.
US treasury secretary Steven Mnuchin has previously warned the US could retaliate with tariffs on UK-made cars.
And speaking at the World Economic Forum in Davos in January, he said President Donald Trump would raise the issue personally with Boris Johnson.
The Prime Minister in December vowed to make major multinational companies pay their fair share of tax.
Rishi Sunak (right, with Boris Johnson yesterday) announced that the 2 per cent levy targeting the likes of US firms Google, Amazon and Facebook will be introduced on April 1
President Donald Trump (pictured yesterday)
Facebook chief executive Mark Zuckerberg recently voiced support for international tax reform, saying at the Munich Security Conference (pictured) that he understood the ‘frustration’ and accepted it may mean his company will have to pay more tax
Companies whose worldwide revenues from digital activities exceed £500 million, with more than £25 million of the revenues from UK users, will fall under the digital services tax.
It is expected to bring in an extra £65 million this year.
In documents published last night after the Budget, the Government said the tax would apply to ‘a group’s businesses that provide a social media service, search engine or an online marketplace to UK users’.
‘These businesses will be liable to Digital Services Tax when the group’s worldwide revenues from these digital activities are more than £500 million and more than £25 million of these revenues are derived from UK users.
‘If the group’s revenues exceed these thresholds, its revenues derived from UK users will be taxed at a rate of 2 per cent.’
It adds that ‘the provision of a social media service, internet search engine or online marketplace by a group includes the carrying on of any associated online advertising service’, suggesting it may also apply to news websites like MailOnline if they breach the revenue threshold.
Facebook chief executive Mark Zuckerberg recently voiced support for international tax reform, saying at the Munich Security Conference that he understood the ‘frustration’ and accepted it may mean his company will have to pay more tax.
The Organisation for Economic Co-operation and Development had already urged the UK to hold off its own plans to allow time for the international approach to succeed.
The Government said it is ‘committed to dis-applying the digital services tax once an appropriate international solution is in place’.