UK introduces 2% tax on search engines, social media services, and online marketplaces

[nanoguy]

Why it matters: Spain, France, and now the UK have all introduced their digital services tax for Big Tech, in an effort to address concerns about multinational corporations avoiding taxation in countries where they derive a profit without a physical presence. Until the OECD comes up with a solution that 137 countries can agree on, some governments feel that an interim solution is high on the priority list.

Last year, the Trump Administration vowed to impose significant import taxes on several French products after the latter country's government announced the introduction of a "digital services tax" that would target companies like Google, Apple, Facebook, and Amazon.

Now, the UK has announced that starting in April, it'll tax revenue made from digital services like online marketplaces, search engines, social media platforms, streaming services, and pretty much any other online company that derives value from UK users.

The Digital Services Tax (DST) will apply to multinational companies that register revenues of £500 million ($641 million) on an annual basis, but only if £25 million ($32 million) of that is derived from UK users. The UK wants to tax the latter chunk at a rate of 2 percent.

HMRC will spend £8 million ($10 million) to develop the IT system and processes needed to monitor and administer the newly introduced tax, and the estimated effect of DST is expected to range from £280 million ($359 million) in the first year to more than £500 million ($640 million).

By comparison, Spain and France are looking to tax digital revenue at a rate of 3 percent, but the latter country has been persuaded by other EU members to hold off on applying the new rules until the end of this year, when the Organization for Economic Cooperation and Development (OECD) will have to reveal a preliminary draft for international tax rules that are supposed to bring 137 countries on the same page.

This would generate a total of over $100 billion in global corporate income tax revenues that will be beneficial for both high-income and developing economies, and will make profit shifting much less appealing to big tech companies.

As for the UK, the decision will arguably affect US-based companies disproportionately, which is bound to increase tensions between the two countries. At a Davos meeting in January, US treasury secretary Steven Mnuchin hinted that a levy on UK car exports is a very likely outcome for the DST.

Global trade association ITI -which is a lobbying group representing companies like Google, Amazon, Facebook, Apple, Snap, Twitter, and eBay - noted in a public statement that "the digital services tax proposed by the UK represents the latest in a worrying and very real trend of countries departing from important multilateral efforts to secure an agreement on international tax reform."

Permalink to story.

https://www.techspot.com/news/84360-uk-introduces-2-tax-search-engines-social-media.html

 

[Uncle Al]

A simple look at the profit margins of big tech indicates they can easily pay such a tax and considering how many are able to manipulate their books to the point of paying little to no taxes this would appear to be a justified tax. Clearly, these countries should fix their tax laws so these companies pay a straight tax based on earnings with no exemptions but the lobby for so many large companies will do everything in their power from ever allowing such a move.

 

[Mithan]

Considering how they are killing local businesses, who do pay local taxes to keep the local area running, this needs to happen, at a higher rate.

 

[VitalyT]

Why won't they introduce a tax on stupidity? Is that because the government won't be able to pay up?

 

[Impudicus]

Tax everything!

 

[BigRedPDX]

Tax life itself!

 

[Evernessince]

Why won't they introduce a tax on stupidity? Is that because the government won't be able to pay up?

The government is a reflection of the people. If it's not, you've got a bigger problem in your democracy not representing you.

 

[VitalyT]

The government is a reflection of the people. If it's not, you've got a bigger problem in your democracy not representing you.

These days governments are more like sediments, leeching off tax payers. They represent nothing but their own petty interests.

 

[p51d007]

I'm surprised they never went through with the "tax on email".
That would be fun to see, because of all the spam.

 

[mailpup]

I'm surprised they never went through with the "tax on email".
That would be fun to see, because of all the spam.

You may be on to something. Tax spam.

 

[candle_86]

You may be on to something. Tax spam.

Nah cause then your gonna hear stories about the government giving money to a bunch of Nigerian princes.

 

[Yynxs]

A tax is normally imposed on transactions and requires the identification of the two or more parties in the transaction for their tax records and reporting. A flat rate still counts the total number of transactions and gets a taste of the monetary exchange. Eventually, reducing the tax, a normal corporate goal, requires identifying and counting the data ownership and data movement and then proving this count is valid to tax collectors. Passing the tax to the consumer or vendor, another normal corporate goal, requires deeper and more specific digging and reporting on and into the identities of the parties.

In the US, the income taxes allow you to deduct taxes paid to local municipalities and states. International taxes are normally the bailiwick of international companies and accountants; an EU transaction tax would move that bit of complexity to the user. This introduces an interesting qualification for games such as WoW where usage and play and data movement across internationally registered and clustered cloud addresses that are physically located elsewhere. I don't know the ins and outs of the EU member nations' and the UK income taxes, but if you can deduct a tax against income tax or it's local similarity, the results are the same. Usage and data movement must be tracked and reported to prove the payment for the deduction. This doesn't even include international border crossing of bulk data, a prime secondary tax target, through cables.

This 'tax' is but the first step in getting directly at user data and/or the data interactions. If Musk and his satellite cloud get full implementation (along with others' satellite clouds), it should be interesting watching how these countries attempt to respond. The reality is it will be easier to get a standard per byte use tax from the user directly than the companies if user privacy raises it's ugly head.

Welcome to real globalization.

 

[Porkous]

While these companies also brought some of their lucrative branches of businesses into those countries.

 

[BadThad]

More leftist, socialist confiscation of wealth from the USA. The ultimate goal of the "world order" is to steal America's money to keep their flawed socialist programs alive and to keep the people dependent on government so politicians can stay in power.

The sooner the leftists in the USA come to the realization that they've been duped into liberal policies of money confiscation, the better off ALL people will be. Don't you leftists realize WHY the ultra rich and celebrities subscribe to liberalism? It's so they can keep their money and power and hold the rest of down in a state of control and dependence while they get to keep theirs.

 

[Yynxs]

More leftist, socialist confiscation of wealth from the USA. The ultimate goal of the "world order" is to steal America's money to keep their flawed socialist programs alive and to keep the people dependent on government so politicians can stay in power.

The sooner the leftists in the USA come to the realization that they've been duped into liberal policies of money confiscation, the better off ALL people will be. Don't you leftists realize WHY the ultra rich and celebrities subscribe to liberalism? It's so they can keep their money and power and hold the rest of down in a state of control and dependence while they get to keep theirs.

With utter apologies for the groans: https://www.azlyrics.com/lyrics/beachboys/surfinusa.html

Everybody wants serfs in
Serfs in USA.

 

[yeeeeman]

A simple look at the profit margins of big tech indicates they can easily pay such a tax and considering how many are able to manipulate their books to the point of paying little to no taxes this would appear to be a justified tax. Clearly, these countries should fix their tax laws so these companies pay a straight tax based on earnings with no exemptions but the lobby for so many large companies will do everything in their power from ever allowing such a move.

Most of the big companies are avoiding taxes, even in US, so I see no problem with it. Just look at how hard Apple cried when Qcom asked them to pay 3 more $ on a modem unit. In the end, they agreed to pay.

 

[Yynxs]

I'm never sure where this sleight-of-hand view of corporate taxes comes from. The companies aren't paying the taxes. You, the consumer, are paying the taxes. For a company, especially an international company, the problem is how to effectively pass the cost of taxes to the consumer and still have price competitive products in a 'GLOBAL' economy, especially a technologically reactive global economy that moves faster than protective tax structures.

Governments, your governments, dance around the corporate problem of competitiveness either by being bribed and hiding the bribery in election expense or using the prior knowledge of corporate directions to garner investment profits for the tax creating representatives. This is all old profiteering methodology going back to access to the royal courts.

For me, the interesting part of tech social awareness is the concept that the backbone data transport providers can be robbed of profiting from their considerable investment and constant payment of 'right-of-way' costs by the data giants' social steering of and profiteering from the lie of the free internet. That's an ongoing offshoot of socialism vs capitalism. This social steering has worked on the very young and it remains to be seen whether it persists into their investment for retirement futures. Attempting to tax the data movement giants is an indication it will not.

In any case, outside of monopolies, the corporate short term bleeding to new taxes will always be bandaged with price change upward to the consumer or replacement goods or services from new entries into the market. As and example, in the past 30 years I've used a motorola brick and pager, a nokia non-flip phone (still clinging to the pager), hand-me-down iphones, and finally month-to-month walmart rentals that allow phone number change by simply not paying the rent for a few days to stymie phone spammers. I see feature driven desires in the smartphone market driving consumer change but, like PCs, there is an upper limit to what the normal person does and constant connectivity seems to be palling. There are 'attacks' on the phone monopolies by nation state players these days and time will tell whether those will work.

Taxing the companies for data movement will not work in the long run but taxing the consumer for data use will. There is much more control of the consumer with data as a utility than as a competitively choiced product. Take a look at electricity, gas, and water utilities as examples. Power generation is taxed to the consumer for 'green' social memes with no method for the consumer to escape the tax to a competitor because all competition is metered by the government. Water is taxed for cleansing and then separately for prepping its disposal before adding it back to the waterways. Collecting taxes on data as a utility directly from the consumer gives orders of magnitude more control to governments and more government control is always a government direction.

In short, the consumer will always pay whatever taxes are involved and this should be clearly understood when discussing how to extract corporate profits for the government's waste.

 

[Yynxs]

Back OT: Glad the UK has done this, but it's not enough. 2% is nothing. Letting the US continuously feed like a hegemonic vampire on the rest of the world is not an option anymore, even for their most fervent allies.

Somewhat curious. Are you speaking of "...the US continuously feed like a hegemonic vampire on the rest of the world..." with "...the US..." meaning the United States government or are you referring to "the US" as being the corporations mentioned in the article?