Tech giants will pay dearly in major UK tax shake-up

23 Feb 2018

Westminster Palace. Image: pisaphotography/Shutterstock

Tech firms in the UK will be taxed on revenues, not profits.

In the UK, tech giants are set to face a significant tax shake-up from the government in sweeping new changes planned by financial secretary to the treasury, Mel Stride.

The new tax regime will see large tech companies such as Facebook and Google pay taxes on their revenues rather than profits, which are smaller figures.

‘We want to move to a situation where we are taxing those activities fairly’

Future Human

Stride said in an interview with the BBC that taxes on revenues were the “potentially preferred option” following a government review.

He said that the British government wanted to “move to a situation where we are taxing those activities [of large digital businesses] fairly.”

Stride continued: “At the moment, they are generating very significant value in the UK, typically through having a digital platform with lots of users interacting with that platform.

“That is driving a lot of value, so you’re looking at social media platforms, online marketplaces, internet search engines – where, at the moment, the tax regime is not taxing those activities fairly.”

Tax overhaul of internet businesses likely across Europe

Stride’s comments come in the wake of a government consultation on changes to taxation of the digital economy in the UK.

This is down to fears that large internet businesses such as Google and Facebook do not pay enough taxes in the UK.

Google, for example, reported £1bn in revenues in the UK in 2016 and a pre-tax profit of £149m.

Many countries are looking at overhauls of their corporate tax systems due to the increased globalised nature of tech companies and out-of-date tax frameworks that were conceived in a pre-internet age.

EU countries such as France are also attempting to introduce a revenue tax that makes it harder for US tech giants to cut tax bills by channelling profits between countries.

This comes in the wake of major developments on the taxation front, most notably in 2016 when the EU ordered the Irish Government to retrieve €13bn that the EU claims Apple avoided paying, thanks to alleged sweetheart deals.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years