Frances Ball 12 Jul 2019 11:58am

Treasury’s digital services tax to go ahead despite US anger

The UK will press ahead with plans for a digital services tax, despite the US threatening sanctions on France for similar proposed legislation

The Treasury’s tax would apply a 2% levy on the revenues that some social media platforms, search engines, and online marketplaces earn from UK customers.

In an effort to protect start-ups, businesses will only be liable when their group’s worldwide revenue from digital activity is more than £500m, and when more than £25m is derived from UK users.

France introduced its own digital tax levy earlier this year. Yesterday, the US launched a probe into the French tax, claiming disproportionate impact on American companies.

Diplomatic relations between the UK and the US are at a low, after confidential cables from the British ambassador condemning president Donald Trump’s administration were leaked to the press.

However, the Treasury will be pressing ahead with its plans for a digital services tax.

Ministers at the G20 conferences in Japan last month discussed the possibilities around a unified global digital tax solution – which remains the Treasury’s preferred outcome.

A spokesperson for the Treasury said, “Our Digital Services Tax is a targeted, proportionate, and temporary tax that will ensure large digital businesses pay tax that reflects the value derived from their UK users.

“We’ve been clear that our strong preference is for a global/OECD solution, and that’s why we’ll be discussing this at the G7 next week. Once an appropriate global solution is in place, we will no longer need our own Digital Services Tax.”

Countries should collaborate on a global digital tax effort, the Treasury said.

A 2% levy on liable digital giants would raise £275m between 2019-20, rising to £440m by 2022-23, according to the Treasury’s estimations.