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Finance Bill - Sitting 5

11 June 2020

Proposing MP
Andrew Rosindell Con
Romford
Type
Public Bill Committee

At a Glance

Issue Summary

The statement discusses clauses related to the Digital Services Tax introduction in the Finance Bill. The statement discusses the introduction of the Digital Services Tax (DST) as part of the Finance Bill. The speaker discusses concerns about the digital services tax and its impact on local businesses, highlighting the need for a more ambitious approach to ensure multinational companies pay their fair share of taxes. The statement discusses concerns about the Finance Bill's impact on large digital companies like Amazon, suggesting that the bill may not address their tax contributions adequately. The MP discusses concerns about the UK's digital services tax and its impact on transparency, fairness, and revenue generation. Andrew Rosindell discusses concerns about the UK's digital services tax, its potential for double taxation, and the need for a multilateral approach to taxing digital companies. The statement discusses the introduction of a digital services tax in the UK and its implications for businesses and taxation. The MP discusses the principles behind the Finance Bill and its measures related to tax laws, particularly focusing on the diverted profits tax and base erosion and profit-shifting rules. The statement discusses the Digital Services Tax (DST) and its application to digital businesses with global revenues exceeding £500 million, focusing on the tax's rate and how it will be calculated. The statement addresses concerns and technical issues related to clauses in the Finance Bill regarding digital services tax (DST) thresholds, safe harbour provisions, and royalties.

Action Requested

No specific action is requested; the MP is facilitating discussion on clauses 38 through 44 of the bill, which are related to the Digital Services Tax introduction.

Key Facts

  • Clauses 39 to 44 stand part for discussion.
  • The topic involves the Digital Services Tax introduction.
  • DST will levy a 2% charge on revenues from search engines, social media platforms, and online marketplaces.
  • Annual global revenue threshold for DST application: £500 million.
  • The tax applies only to revenues attributed to UK users above £25 million.
  • Online financial services are exempted from the definition of an online marketplace.
  • Low profit margin businesses can pay a reduced rate, while loss-makers will be exempted.
  • DST aims to address issues in international corporate tax rules and is expected to raise up to £2 billion over five years.
  • Government's digital services tax is expected to produce £280 million this financial year and increase to £465 million by 2023-24.
  • TaxWatch estimates that the UK loses £1.3 billion in corporation tax from five of the biggest UK tech firms annually due to offshore profit shifting.
  • The digital services tax targets about 30 groups according to the OBR's 2018 assessment.
  • Large companies such as Amazon are unlikely to be substantially affected by the Bill.
  • The Bill aims to support start-up companies.
  • There is an implication that big digital companies get away with not paying enough tax.
  • The proposed measure aims to address tax avoidance by tech giants but has been criticized for its modest impact.
  • TaxWatch UK estimates that Facebook's tax bill would increase by £39 million despite UK revenues of almost £2.3 billion.
  • Netflix, a streaming service, avoids significant taxes through offshore structures and intra-company transactions.
  • The UK's digital services tax may breach double tax treaties and international trade law.
  • The OECD is expected to publish a final report on taxing multinational enterprises later this year.
  • Rosindell questions the enforcement and implementation of the tax, particularly data collection by HMRC.
  • Digital services tax aims to reflect changes in the economy.
  • The tax will raise £2 billion annually from very large businesses.
  • HMRC has a dedicated digital team to monitor self-assessment for this tax.
  • The diverted profits tax is part of the most progressive tax changes in recent years.
  • The independent OBR estimates £2 billion revenue over a five-year period.
  • The UK Government considers 2% an appropriate level for a new tax to be sustainable.
  • DST applies only to groups with annual global revenues from digital services of over £500 million.
  • DST rate is set at 2%.
  • DST will apply only on UK user-generated revenue above £25 million.
  • Relief for cross-border transactions minimises double taxation risk by applying the UK DST to 50% of relevant revenues in such cases.
  • The tax is expected to raise up to £2 billion over five years.
  • £25 million threshold designed to exclude small businesses from DST.
  • Safe harbour provision ensures DST is not overly punitive for low-margin or loss-making businesses involved in UK activity.
  • The tax works based on consolidated figures of groups, and royalty payments typically used within groups are outside the scope of revenue charge.
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