The UK government has confirmed plans to impose a digital services tax on technology giants such as Amazon and Facebook.

The new digital services tax will see companies that earn more than £500m in digital revenue, with over £25m coming from UK users, pay a 2% levy.

The so-called ‘Amazon tax’, first unveiled by Chancellor Philip Hammond in last year’s autumn Budget, will come into effect next April, according to draft legislation of the government’s next finance bill.

The move comes shortly after the White House threatened to impose tariffs on France for similar legislation, which it claimed unfairly targets American businesses.

Paymaster general and financial secretary to the Treasury Jesse Norman said: “The UK has always sought to lead in finding an international solution to taxing the digital economy.

“This targeted and proportionate digital services tax is designed to keep our tax system in this area both fair and competitive, pending a longer-term international settlement.”

The UK government asserts that the digital services tax will raise £400m per year by 2021.

KPMG tax partner Matthew Herrington said: “There is clearly no appetite at present from the UK government to shelve the proposals pending wider global co-ordination.

“However, it does remain to be seen whether this will change in light of today’s announcement that the US may impose retaliatory tariffs relating to the French digital services tax.”

Topics