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 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.