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UK Announces New Revenue Tax For US Tech Titans

With questions now being raised about the collection of GST in Australia, the Brits may have an answer with the proposed introduction of a digital tax on all online operators who don’t have bricks and mortar stores. The big question is how will be taxes be collected because it appears that the ATO is already struggling to collect GST revenue from overseas operators.

The British government has unveiled plans to introduce a digital services tax in April 2020 in which US tech companies will be charged 2% on the revenue they make from their UK customers.

The tax, which won’t begin until April 2020, is among the new economic policies by Chancellor of the Exchequer Philip Hammond as part of the country’s annual budget.

It is the first time that the UK has targeted at US tech firms, who are often accused of not paying their fair share of tax, and puts them ahead of the EU and US on taking big tech firms in this way.

Currently, Google, Amazon and other big tech firms pay a small amount of corporation tax on profits they report in the UK, but not on their revenue.

The main details of the plan are not yet set in stone, but the bones of it state that digital companies with revenue of more than £500 million (US$640 million) per year globally will be required to pay 2% on revenues generated within the UK.

The £500 million cut off is designed to avoid hitting smaller startups with the new tax.

Most big US tech companies implement a complex tax system that involves putting their sales through a subsidiary in a country with lower taxes, which in Europe is usually Ireland. Which is why most big tech companies have their EU base office in the Republic of Ireland.

However, many are not happy with the new plan, TechUK, a British lobbying group with Facebook, Amazon, and Google members, has openly opposed the new tax plan.

Business Insider quoted their CEO Julian David saying: “The kind of tax being proposed will be bad for investment and bad for the UK economy” that the UK breaking away from the EU and the OECD to introduce a national tax was “the wrong idea.”

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