Monday, October 29, 2018

‘Digital Services Tax’ Targets Big US Tech Groups

Wherever a government sees a pile of money, they will attempt to tax it. And also use taxes as a weapon.

The UK government has vowed to introduce dramatic changes to how large technology companies are taxed in an attempt to ensure internet giants pay their "fair share," reports the Financial Times.

Chancellor of the Exchequer Philip Hammond said on Monday that Britain would take unilateral action against large technology companies by introducing a “digital services tax” by 2020.

Hammond said the measure, which is expected to raise more than £1bn for the exchequer by the end of 2023, was necessary to address concerns about the “fairness of the tax system”. He said: “It is only right that these global giants with profitable businesses in the UK pay their fair share.”

The plan calls for an additional 2 percent tax on certain UK-generated revenues of search engines, social media platforms and online marketplaces. It will only apply to companies that are profitable and make annual global revenues from certain services of at least £500m.

According to the FT, Dan Neidle, a partner at Clifford Chance, the law firm, said the proposal — which is likely to catch Google, Amazon, eBay, Facebook and Apple — was “dramatic in that it’s a clear attack on the large internet companies”.

Spain earlier this month released a draft bill introducing a digital services tax by 2019. That tax rate would be 3 percent.



  1. May the "law of unintended consequences" cause both Spain and the UK to be abandoned by "digital services providers", such that both are returned to becoming "analog" environments. Back to using slide rules, manual typewriters, vinyl records, rotary telephones, etc. "Retro chic" - I'm sure that it will be a big hit with the electorate ....

  2. That politicians make the "fair share" argument with such little pushback shows how much intellectual sloth has seeped into society. First, "fair share" is never defined arithmetically, as in a specific tax rate or percentage of tax revenues, but rather algebraically, as in "Whatever you're paying now, plus some." Second, can you imagine the pushback we'd see if Wal-Mart claimed that some potential customers weren't buying their "fair share," and sent armed goons around to extract that? Third, as Rothbard noted, in the private sector everyone pays the same fixed amount for a service, whereas when the public sector "provides" a service, it charges based on a percentage of one's income. Imagine if you went to buy a drill set, and Home Depot said, "Tell me what your income is and I'll tell you what the price is."