Digital tax is coming…

Digital tax is coming… Share

This week we’re not talking about HMRC’s new procedures in making tax digital (but if you want to know more about that this article may be helpful for you), rather the tentative steps that are being taken by countries around the world to tax online companies – especially the big ones.

Stalemate or step forward?

In many ways this news is welcome, as several countries who have been considering this move for some time are now waking up to the possibility that adding more to their coffers in this way is possible.

But why has it taken so long for one nation to step forward and do it, and who is it that’s taking that first brave first move?

All eyes on France

Last week, French finance minister Bruno Le Maire revealed in Le Parisien newspaper that the nation would be among the first to roll out a new digital tax on big web-based companied, with the likes of Facebook, Amazon, Google and Uber among those expected to be taxed by the French government from January 2020.

Current plans show that companies would need a worldwide digital revenue of at least €750m and French revenue of more than €25m to be considered eligible for the new tax, which would affect around 30 digital giants.

The new tax is being described as “fiscal justice”, by Le Maire, continuing that a taxation system for the 21st century has to be built on what has value today: data.

Germany, along with France, has previously pushed for such a tax to be implemented, but other nations have been reticent for fear that such a move could hurt innovation and keep multinationals away from their countries.

A global tide-change

While France may be making the headlines currently, a similar wave is happening in the UK and beyond. In his most recent Budget, UK chancellor Philip Hammond announced the implementation of a 2% digital services tax due to come into effect from April 2020, which is expected to raise €440m by 2023/24.

Furthermore, last month, New Zealand’s prime minister Jacinda Ardern proposed a digital service tax that would charge multinational online companies at 2% to 3% of the revenue they create in the country. If approved, it will likely be implemented next year.

“Our current tax system is not fair in the way it treats individual tax payers, and how it treats multinationals,” Ardern revealed at a news conference.

“Many web-based companies, such as those offering social media networks, trading platforms, and online advertising, currently earn a significant income from New Zealand consumers without being liable for income tax,” the government said in a statement released after the announcement.

 

The current value of cross-border digital services in New Zealand is estimated to be around NZ$2.7 billion ($1.86 billion), meaning the revenue estimate for a digital services tax is between NZ$30 million and NZ$80 million, Finance Minister Grant Robertson said in the statement.

Many other governments will now doubtless be watching and waiting with baited breath to see how much revenue is raised by this tax in reality – and what next move the multinationals might make in response. We’ll keep you updated!

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