U.K. to Roll Out First-of-Its-Kind Digital Tax

The U.K. said it will move ahead with plans to introduce a tax on locally generated revenue by large technology firms. Several other countries are attempting to implement similar legislation on digital services that provided by large companies such as Facebook and Google.

At issue is how governments collect taxes from the handful of tech firms that have morphed into global, digital consumer-services giants, many of which are based in the United States. It has been a question on how to form a standardized tax for these types of companies for years. The Organization for Economic Cooperation and Development, a forum of wealthy countries, has been leading the international digital-tax talks. The U.K. said they were tired of waiting, and plans to start taxing the tech firms by 2020.

The proposal would affect businesses generating U.K. revenue from services including search engines, social-media platforms and online marketplaces. That makes the ad-selling businesses of Google and Facebook particularly vulnerable. It would only target large companies that have a global revenue of at least half a million pounds, for $641 million, and apply a 2% to income accrued in the U.K. Though it may seem like a negligible amount to these giants, it is the first concrete step towards taxing these types of business in any country they generate income in.

See Paul Hannon & Nina Trentmann, U.K. to Roll Out First-of-Its-Kind Digital Tax, Wall Street Journal, October 29, 2018.