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Digital Services Tax concerns raised by ICAEW

ICAEW has responded to the UK consultation on a Digital Services Tax and to the OECD consultation on addressing the tax challenges of the digitalisation of the economy.

"Tax"

April 2019

The OECD held a public consultation on 13 and 14 March in Paris to discuss its next steps. See the agenda, the consultation document and the responses. 

You can read more about the background to all these developments in Ian Young’s article in the March edition of TAXline.

UK Digital Services Tax

Read ICAEW’s representation to the UK consultation on a Digital Services Tax (DST).

The DST will be a 2% tax on the UK revenues of digital businesses which derive significant value from users and is intended to apply to social media platforms, search engines and online marketplaces. Only the largest businesses with global income of more than £500m and at least £25m attributed to UK users will be affected and there will be some relief for businesses whose UK activities are not particularly profitable.

DST is intended to be a short-term measure until a sustainable international solution to the problem is reached, for instance as a result of the current OECD efforts.

ICAEW is concerned about the way in-scope businesses are going to be identified and how the government will ensure that the tax does not just carry on even if an international solution is agreed. In relation to both the UK and the OECD consultation ICAEW emphasised the need to have clear underlying principles to underpin any ‘solution’.

Twenty years ago the Tax Faculty published its Ten Tenets towards a Better Tax System which are still relevant today. In the UK context these principles were taken up by the Treasury Select Committee in their 2011 report Principles of tax policy.

OECD: Addressing the tax challenges of the digitalised economy

There are a number of options, pillars and proposals, in the OECD consultation but again, in the ICAEW response, it was concerned that clear principles need to underpin any solution.

In addition to the Ten Tenets the OECD itself developed the Ottawa Taxation Framework Principles when it was considering the challenges of electronic commerce at the end of the 20th century.

This article first appeared in the ICAEW TAXwire.

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