The Chartered Institute of Taxation (CIOT) welcomes the Chancellor’s commitment to the G20 and OECD discussions to achieve a long term global solution to taxing digital multinational companies. It hopes that the Chancellor’s announcement of a proposed interim UK digital services tax will help galvanise the international community to achieve this outcome.
Glyn Fullelove, Chair of CIOT’s Technical Committee, said:
“The proposed digital services tax is a blunt instrument that is likely to over-tax companies (who have relatively small profit margins) on UK created value and under-tax others. The expected yield of £400m (from a tax rate of 2%) suggests that the Chancellor is targeting £20 billion of revenues attributable to UK users of digital platforms.
“We suspect that identifying and allocating these revenues will be problematic and may lead to companies disputing how much tax is due.
“The best outcome would be that the announcement today spurs the international community to find a globally agreed solution to taxing digital multinational companies by 2020 so that this UK digital services tax is never actually introduced.”
Notes for editors
- Corporation tax is based on profits, not revenues.
- Under existing (internationally negotiated) principles of global tax, a multinational group’s profits are broadly speaking taxed in the countries in which it undertakes its value-generating activities rather than, necessarily, where it makes sales.
- A key risk arising from this proposed unilateral UK digital services tax is that other countries may be encouraged to introduce their own unilateral approaches, or even retaliate against the UK.. Whilst the UK appears to wish to target a relatively small group of the largest multinationals whose business models are heavily dependent on users, other countries may wish to tax a wider range of services, and UK based companies may find themselves taxed overseas on profits which we look to tax in the UK.