Thursday, 12 March 2020 09:03

Britain introduces 2% digital services tax in 2020 budget

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Britain introduces 2% digital services tax in 2020 budget Image by Eric Perlin from Pixabay

The UK has introduced a 2% digital services tax on the revenues that certain digital businesses earn from 1 April, in its 2020 budget which was presented to Parliament on Wednesday. Also announced was an increase of £22 billion in public sector research and development spending.

Chancellor of the Exchequer Rishi Sunak said the DST was in keeping with the announcement made in the 2018 budget.

"This will ensure the amount of tax paid in the UK reflects the value these businesses derive from their interactions with, and the contributions of, an active user base," according to the budget papers.

The DST covers businesses that generate global revenues of more than £500 million (A$987.8 million), with at least £25 million of this coming from UK users. A group’s first £25 million of revenue coming from UK users will not be subject to the tax.

The law that was put in place means businesses will have to pay the tax every year. However, the government said it would "continue to give consideration to how the legislation applies to marketplace delivery fees and whether that application was consistent with the policy rationale of the DST".

"The government remains committed to developing a multilateral solution to the challenges digitalisation has created for the corporate tax system and will repeal the DST once an appropriate global solution is in place," it said.

France already has a 3% digital services tax in place, having introduced the measure in 2019. However, following protests from the US, it has decided to defer collection of the 2020 tax until 2021. This tax is expected to raise about €400 million.

Sunak said the government would provide £5 billion for the most inaccessible 20% of the country to get gigabit broadband.

To improve mobile coverage, the government said it would commit up to £510 million, to be matched by industry, ensuring that 95% of the country would have high-quality 4G coverage within five years.

The government also pledged to legislate to apply a zero rate of the value-added tax to e-publications from 1 December, making e-books, e-newspapers, e-magazines and academic e-journals entitled to the same VAT treatment as their physical counterparts.

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Sam Varghese

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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