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U.K. Debuts Digital Service Tax In Draft Finance Bill

July 11, 2019, 12:19 PM

The U.K. is pushing ahead with its plan for a 2% tax on the digital revenue of tech giants like Apple Inc. and Facebook Inc. in its draft finance bill for 2019-20.

The tax, proposed by Chancellor Philip Hammond in October after efforts to agree on an EU-wide measure failed, will apply from April 2020. The tax would apply to businesses with at least 500 million pounds ($625 million) of worldwide digital revenue and 25 million pounds of U.K. digital sales.

  • The U.K.'s push comes as France’s Senate July 11 passed legislation for a 3% levy on large tech companies. Austria is also plowing ahead with its own digital services tax, and the OECD is trying to hammer out a global approach to taxing digital businesses to avoid a variety of unilateral measures.
  • Also in the bill is a rule that would hold directors and others involved in tax avoidance, evasion, or phoenixism jointly and severally liable for company tax liabilities, where there is a risk that the company may deliberately enter insolvency. Phoenixism is the practice of carrying on the same business or trade successively through a series of companies where each becomes insolvent, dodging out on debts.
  • In a move that could affect Alphabet Inc.'s Google, the draft bill also includes a measure that would extend IR35 rules, which govern determination of when a freelance worker is deemed to be an employee, to the private sector, which could trigger social security taxes.

To contact the reporter on this story: Hamza Ali in London at hali@bloombergtax.com

To contact the editors responsible for this story: Meg Shreve at mshreve@bloombergtax.com; Kathy Larsen at klarsen@bloombergtax.com