U.K. Rolling Out Digital Tax, Won’t Begin Until 2020

The U.K. will launch the world’s first digital tax which will take effect 2020. It’s expected to generate at least £400 million (US$512 million) annually (via Wall Street Journal).

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U.K. Digital Tax

The digital tax will be primarily aimed at large, profitable corporations that make at least £500 million (US$640 million) annually. The tax would be levied on activities linked to U.K. usage of online services like search engines, social media, and online marketplaces.

Apple and a Big Pile of Cash

The Office for Budget Responsibility, the U.K.’s fiscal watchdog, said that the Treasury’s estimate of how much tax the new levy will raise is highly uncertain. Among the questions as yet unanswered about the new tax’s structure are whether it will be deductible against corporation tax, for instance. The watchdog also flagged a range of ways the new levy could affect corporate behavior as companies seek to minimize any liability, such as by reclassifying revenue as income not covered by the tax.

Critics say that a plethora of countries imposing their own taxes would hurt small companies, stifle international trade, and discourage investment.

And of course, American companies are opposing the tax, with lobby group Information Technology Industry Council, which represents companies like Google and Facebook, saying that “imposing a digital tax could create a chilling effect on investment in the U.K. and hinder businesses of all sizes from creating jobs.”

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