Tech giants face tax crackdown

Chancellor Philip Hammond has announced a new digital services tax on the UK-generated revenues of the big tech players.

Bowing to mounting pressure over the comfortable tax arrangements of businesses such as Amazon, Google and Facebook, the Chancellor said the tax will come into effect in April 2020 and is expected to raise over £400m a year, with the tech giants being taxed 2% on the money they make from UK users.

However, the tax – announced as part of the 2018 Autumn budget – will only come into force unless a better global solution is presented and it will exclude tech start-ups and smaller businesses, instead only targeting those firms with global revenues of at least £500m.

Last year, Google and Facebook generated more than £4.4bn in the UK, while Google paid £50m in UK tax and Facebook just £15.7m in corporation tax – to be reduced to just £7.4m after a tax credit is applied.

Currently the tech giants pay such low taxes on their profits because they do not have a large physical presence in many countries, a loophole that has attracted much criticism.