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British chancellor Philip Hammond announced today (Oct. 29) that the UK will impose a digital services tax on the domestic revenue of the "established tech giants," most likely targeting companies like Facebook, Google, and Amazon.
"It is only right that these global giants pay their fair share," Hammond said during his annual speech to the UK government's budget and fiscal outlook, the last budget before the UK exits the European Union in March 2019. "It's clearly not sustainable, gold fair, that digital platform businesses can generate substantial value in the UK, "Hammond added. He warned this month that the UK could go on a digital services as an international agreement were held up by the US.
Europe's view of America's technology has been darkened in recent years. While Silicon Valley's companies have bestrode the globe, claiming billions of users and even higher valuations, Europe's startup bench remains anemic. Except for SAP and Spotify (paywall), few of the continent's tech companies are even pushing $ 30 billion worth. With Facebook, Amazon, Apple, and Alphabet leading the way, America's tech giants are now flirting with $ 1 trillion ratings and vacuuming up the global economy. Not surprisingly, they continue to run afoul of EU regulators over privacy, competition, and taxes.
The EU has a record € 4.34 trillion ($ 5.04 trillion) for its services, and search engine. In 2016, Apple was forced by the EU to fork over $ 16 billion in back taxes to Ireland. The EU's General Data Protection Regulation, enacted in May 2018, en français en français en français en français en français returned. In September, the EU's competition commissioner, Margrethe Vestager, said a preliminary investigation had been opened into possible antitrust violations by Amazon.
Of course, Silicon Valley sees this reaction by EU's regulators. As long as they can not have hometown tech heroes, they'll tax and regulate those in the US, the thinking goes. At last year 's NewCo Shift conference in San Francisco, the feeling among venture capitalists on the topic of Europe had failed to create a technology sector, and was taking it out on American players. One investor said Europe should stop trying to dictate policy for US startups until it is cultivated tech giants of its own.
The UK tax, at 2%, will be implemented from April 2020. According to forecasts for the Office for Budget Responsibility (OBR), the new tax will bring in £ 300 million ($ 384 million) in its first fiscal year and £ 400 million in the following two years. Hammond joked that he was looking forward to a call of the deputy prime minister and leader of the Liberal Democrats, Nick Clegg, who was recently hired by the head of its global affairs and communications team.
The United Kingdom's announcement is currently in progress for the United States (of which the UK is a member for another few months). By the end of the year, the EU may announce a 3% levy on big tech group's local revenue, with a key debate taking place among members states next week. US leaders criticized the EU plan as discriminating against US companies, and the UK plan will surely get a similar reception.
The tax is designed to hit large global corporations and not smaller tech start ups. Hammond said it would be worth 500 million in annual global revenue. Targeted services include social media platforms, search engines, online marketplaces, and collaborative sharing platforms. "These businesses typically generate revenue for the service they offer," the OBR said.
Digital platforms have been infamously paid in the UK in recent years. Last year, Facebook said it paid £ 15.8 million in tax in the UK, but reduced this bill by claiming tax credits of its employees shares in the company, its original tax bill was just 7.4 million, or less than 1% of its UK revenue. One of Amazon's UK units paid just £ 1.7 million in tax on a £ 72 million profit last year, while Google paid nearly £ 50 million on UK profit of £ 202 million.
Hammond said the tax will only be implemented. The OECD hopes for agreement on cross-border tax, but there are still many points of disagreement (pdf) among countries, despite discussions spanning nearly half a decade.
