Philip Hammond introduces 'digital services tax' targeting big tech

philip hammond budget 2018

Chancellor Philip Hammond has announced a 'digital services tax' which will apply only to technology giants that are profitable and generate at least £500 million a year in global revenues, which he hopes will raise £400 million

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Chancellor Philip Hammond has announced a 'digital services tax' which will apply only to technology giants that are profitable and generate at least £500 million a year in global revenues, which he hopes will raise £400 million.

He said in this year's budget announcement, held today, that the "rules of the game" must evolve to adjust to the new digital economy. While digital platforms had changed our society and economy "mostly" for the better they also pose a challenge for sustainability and the fairness of the tax system.

The tax will come into effect in April 2020, and will not impact consumers or startups. Hammond added that the government will consult on the details to "make sure we get it right" and to "ensure that the UK continues to be the best place to start and scale up a tech business".

It was not sustainable, Hammond said, that tech companies don't pay a level of tax in the UK that reflects the financial value that they generate in the country. He said that the UK had been leading attempts for digital tax reform to create a global agreement, but in the meantime, the digital services tax will fill that gap. He added that if a better solution is reached internationally i.e. via the EU, then the government will consider replacing the digital services tax with the international effort.

But, points out Bloomberg, the EU version has been slow to gain momentum, and would require unanimous support of the European bloc for it to be passed.

Other technology-related announcements in the budget included additional monies for infrastructure, research and skills, details of which are listed in the red book. Part of the infrastructure investment will be for installing better broadband in rural areas, an area of contention in recent years over 'not-spots' where access is severely limited.

Hammond did mention supporting research in quantum computing and nuclear fusion by way of £1.6 billion in new investments for the country's industrial strategy, plus an increase in national productivity investment in the coming decades.

And £150 million will go to new fellowships designed to attract the "brightest talent" to the UK - to address presumably the elephant in the room, a potential brain drain as talented European workers leave Britain post-Brexit.

An additional £1 billion was announced for the Ministry of Defence for the remainder of the year, and Hammond specifically referred to cyber capabilities and the sea deterrent Dreadnought programme.

Referring to Britain's "greater alacrity" for spending online, Hammond said £675 million in funding will go to a 'future highstreets fund' to support councils draw up "formal plans" to address the transformation of the high street.

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