An announcement made by the Chancellor, Phillip Hammond stated that the government would soon increase taxes on firms that conduct their business online.
According to Hammond’s announcement, technology groups like Google and Apple will now be required to pay a new withholding tax on all royalty payments made to their subsidiaries in low-tax jurisdictions.
This new form of taxation is scheduled to begin from April 2019.
Under Mr. Hammond’s leadership, the UK government has also become stricter on the VAT payments that many online sellers have managed to avoid over the years.
Reports state that these moves will bring in an additional £200m a year.
Thus, the UK government has now declared that it will hold major retail leaders like eBay and Amazon responsible if any seller using their platform is negligent with their VAT payment.
Thus, the retailers themselves will be forced to pay the fine if the businesses operating on their platforms shirk their VAT responsibility. Under the new rule, all businesses must have a valid VAT number.
The Budget statement specified that all payments would be mandatory, “even if the group has no taxable UK presence under current rules”.
It added that the taxing would “prevent multinationals from gaining an unfair advantage by locating an IP in low or no tax jurisdictions”.
As such, the move is likely to create what the government is calling a “level” playing field.
However, a few doubts have been raised as well. For instance, an international tax partner with Deloitte, Alison Lobb stated that it was important that the government clearly defined all “digital companies subject to the digital turnover tax from other businesses”.
Without this distinction, it was likely that a number of businesses would once again escape under the tax radar.
On the whole, however, the new move is being hailed by analysts as a win for the budgeting problems faced by the country.
Analysts believe that the new budgeting move is likely to raise at least £800 m by March 2023.