One of the more unexpected announcements in Philip Hammond’s 2018 Budget speech this afternoon was the introduction of a new “digital services tax”. “This will be a narrowly targeted tax on the UK-generated revenue of specific digital platform business models,” the Chancellor of the Exchequer said. “It will be carefully designed to ensure it is established tech giants rather than our tech start-ups that shoulder the burden of this new tax.”
Hammond emphasised that it would not be an online sales tax, but instead a 2 per cent tax on revenue levied on those digital services companies (retailers, social media platforms, etc.) whose global revenues are over £500m. He claimed that the tax would make £400m annually, from 2020 onward.
Tech giants will be subject to new Digital Services Tax, says Philip Hammond, bringing in £400m a year from 2020
Live #Budget2018 updates: https://t.co/sByoohnzE3 pic.twitter.com/wm1HKEFCs7
— BBC Politics (@BBCPolitics) October 29, 2018
For many, including, seemingly, Philip Hammond himself, this tax seems poorly devised, narrow almost to the point of redundancy, and comes with a healthy heap of unclear and confusing. Luckily though, for those of us looking for extra detail on how the digital services tax will work, the Treasury has released a deeply helpful diagram to explain it.
“We will now introduce a UK Digital Services Tax.
…It will be carefully designed to ensure it is established tech giants – rather than our tech start-ups – that shoulder the burden of this new tax.” #Budget2018 pic.twitter.com/h2hKxMrO1Y
— HM Treasury (@hmtreasury) October 29, 2018
Although this graphic will, of course, guide the Treasury through an easy path to designing a law that a) is loophole free, b) doesn’t waste an enormous amount of civil servant time, and c) doesn’t inadvertently fuck over any small businesses, this tax will inevitably take a while to devise. While we’d all love a law that says “Facebook and Google have to give us all their money”, devising a digital services tax that doesn’t fall into any of these traps is easier said than done. So will this be a monumental waste of time spent on a law that raises, ultimately, very little money? Who’s to say?
“Hey,” you may be thinking, “be fair. I think I read about Amazon and Facebook avoiding tax – surely that will be all sorted?” Well, friends, you guessed wrong! As Amazon continues to avoid tax, paying just £1.7m on it’s £72m in profits this year (that’s 2.4 per cent, for those playing along at home), this new tax will allegedly tax them another 2 per cent at most. But don’t fret – the Chancellor’s £400m prediction, this heaving pile of cash, this gargantuan sum, would impressively pay off almost the amount of money the UK spent on potholes in the first four months of 2018. Although, it’s worth emphasising, not quite.
The problem with the digital services tax isn’t that it’s a bad idea. No: getting companies that aren’t paying their fair share of tax, whilst treating their workers like bladderless, box-making machines with the physical stamina of Usain Bolt, is a good thing. No, it’s not that taxing tech giants more is a bad idea. It’s that taxing them in this minute, pointless manner is a dumb one.
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