Britain's Digital Tax on Big Tech Companies Like Google, Facebook, Amazon Could Become Permanent, Say Experts

The levy was introduced after concerns were raised about low levels of tax paid by some major tech companies.

By Reuters | Updated: 5 April 2023 13:14 IST

Britain's Digital Tax on Big Tech Companies Like Google, Facebook, Amazon Could Become Permanent, Say Experts

The British parliament's Public Accounts Committee said that the tax operated "relatively crudely"

Highlights

The tax raised 30 percent more than expected in its first year
90 percent of the tax comes from five business groups
The tax could effectively become permanent

A levy imposed by Britain on the revenues of big tech companies such as Google, Facebook and Amazon in 2020 as a stopgap measure pending an international tax agreement risks becoming permanent, a group of tax experts said on Wednesday.

The levy was introduced after concerns were raised about low levels of tax paid by some major tech companies and raised GBP 358 million (roughly Rs. 3,677 crore) in its first year.

The Chartered Institute of Taxation (CIOT), representing tax professionals, said there was little sign of a breakthrough in international talks brokered by the Organisation for Economic Co-operation and Development, despite a headline deal in 2021.

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Without an agreement on how to allocate taxation rights that all major trading partners could sign up to, there was a real risk that the tax could effectively become permanent, the CIOT said.

"A revenue tax such as this is a blunt instrument that cannot accurately represent the tax on the profits generated in the UK," the CIOT's director of public policy, John Cullinane, said. "It will inevitably over-tax some companies and under-tax others."

The British parliament's Public Accounts Committee said in a separate report published on Wednesday that the tax operated "relatively crudely" but raised 30 percent more than expected in its first year, with 90 percent coming from five business groups.

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The tax is forecast to raise around GBP 3 billion (roughly Rs. 30,815 crore) by 2024-25, it noted.

The tax, set at a rate of 2 percent of applicable turnover, rather than profit, was levied on companies which operate social media platforms, search engines or online marketplaces with revenues of more than GBP 500 million (roughly Rs. 5,133 crore), of which more than GBP 25 million (roughly Rs. 256 crore) came from British users.

© Thomson Reuters 2023

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