UK budget includes tax on tech giants Amazon and Google | News | DW | 29.10.2018
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UK budget includes tax on tech giants Amazon and Google

The UK's finance minister has unveiled a new "digital services tax" targeting tech giants such as Google and Facebook. The minister also promised an end to public sector spending cuts.

UK Finance Minister Philip Hammond's last pre-Brexit budget on Monday unveiled a new "digital services tax" targeting tech giants. The new tax, which will come into force in 2020, targets tech giants with revenues of more than 500 million pounds (€575 million, $610 million) and is expected to raise 400 million pounds in revenue.

The proposals are designed to target tech giants such as Google and Facebook, which have been criticized for their tax arrangements in the UK.

"It is only right that these global giants with profitable businesses in the UK pay their fair share," Hammond said. "It's clearly not sustainable, or fair, that digital platform businesses can generate substantial value in the UK without paying tax here in respect of that business," he said.

In line with EU plans

Brussels proposed earlier this year that big tech companies should be taxed on overall revenue in the EU and not just on their profits, at a rate of around 3 percent.

The new EU tax plan would target companies with global annual turnover above €750 million, such as Google, Twitter, Facebook, Airbnb and Uber.

Under current EU law, firms can choose to book their income in any member state of the bloc, prompting them to pick low-tax nations such as Ireland, the Netherlands or Luxembourg.

Hammond backs May's Brexit plan

In his budget address, Hammond promised to end austerity, increase spending on the National Health Service (NHS) and cut income taxes.

But he also made clear that higher spending was contingent on London getting a Brexit agreement with Brussels.

Some have interpreted the budget as a political nudge in the direction of those in his own party that do not support the Prime Minister Theresa May's plan to leave the EU to get behind their beleaguered leader. 

Hammond had been rebuked by the Prime Minister's Office earlier on Monday after he had said spending plans in the budget would depend on an eventual Brexit deal. Theresa May's spokesperson said that spending commitments are "funded irrespective of a deal."

Hammond also floated the idea of a regular Spring Statement, seen by some as a contingency plan for an emergency budget in the event of there being no Brexit deal.

"The era of austerity is finally coming to an end ... the perseverance of the British people is finally paying off."

Conservative and Conservative-led governments since 2010 have succeeded in bringing the public sector deficit down from 8.8 percent of GDP to 2 percent, according to the Office for National Statistics (OBS).

The budget deficit

The budget deficit is set to stand at 1.2 percent of GDP in the current financial year, down from a forecast in March of 1.8 percent, Hammond said, adding that this would cut the UK's borrowing requirements between now and the mid-2020s. 

The Office for Budget Responsibility (OBR) said on Monday the government had already spent its 'fiscal windfall' and the medium-term outlook for government borrowing was little changed from March.

Hammond announced an extra 20.5 billion pounds in funding for the NHS over the next 5 years. Other beneficiaries include the Ministry of Defense.

The government would meet its election promise to raise the personal tax allowance to 12,500 pounds (it is currently 11,850 pounds) and raise the minimum wage by 4.9 percent from 7.83 pounds to 8.21 pounds, the minister said. He also pledged to hike taxes on offshore gambling companies and introduce a tax on the manufacture and import of some plastic packaging.

jbh/aw (Reuters, AP, AFP)

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