Digital services tax next year is 'step in right direction', says BA

The UK government's decision to impose the digital services tax on big tech companies next April has been branded "a step in the right direction" by the Booksellers Association. The Publishers Association also welcomed the development.

The government has published draft legislation for the next finance bill and included a new 2% tax, to be introduced on 1st April 2020. The tax will apply to firms with digital revenue of more than £500m, when more than £25m is earned from UK users. The levy is expected to raise £400m for the Treasury each year by 2021.

BA m.d. Meryl Halls welcomed the tax but said it "does not resolve the bigger issues".

“The BA welcomes the government’s continued commitment to the proposed Digital Services Tax, which potentially makes inroads into some of the imbalances of the current tax system.   It’s a step in the right direction, though does not itself resolve the bigger issues," said Halls.

Last year booksellers urged the government to act quickly on the so-called Amazon tax to help “rebalance the playing field” between physical and online retailers and the BA has long called for an overhaul of the business rates system in addition to the new levy. 

Halls added: "As we are all well aware, unfair taxes distort markets, stifle competition, hamper entrepreneurial behaviour and inhibit innovation. The BA has long argued that the current tax and regulatory regime is an analogue system for a digital age, and we know that physical bookshops and other high street retailers bear a disproportionate tax burden, paying £2.30 in rates for every £1 in corporation tax. The recent High Streets and Town Centres in 2030 inquiry by the House of Commons Select Committee on Housing, Communities, and Local Government, revealed that Amazon pays 0.7% of its turnover on business rates, compared with high street businesses spending between 1.5% and 6.5%, a shocking imbalance. Though the digital services tax is not intended to solve the iniquitous business rates dilemma, the BA will continue to press the government to reform the whole business taxation system so that both the consumer and the UK’s high streets benefit.”

The Publishers Association chief executive Stephen Lotinga also commented on the development, saying: "The publishing industry welcomes the government’s proposal to introduce a digital services tax. It’s important that all businesses pay their fair share of tax if we’re going to have a level playing field for high street retailers. As an Association, we will continue to make the case to policymakers that more must be done to ensure we have a competitive digital economy that rewards creators and rights holders for their endeavour.”

Chancellor of the Exchequer Philip Hammond first announced the digital services tax last year and has vowed to make tech giants pay their "fair share" of tax. 

Setting out the plans in a policy paper online, the government said it "still believes the most sustainable long-term solution to the tax challenges arising from digitalisation is reform of the international corporate tax rules...The government is committed to dis-applying the digital services tax once an appropriate international solution is in place."

The plans come after the US launched a probe into a similar tax in France, saying it unfairly targets American companies.

Paymaster general and financial secretary to the Treasury Jesse Norman said: "The UK has always sought to lead in finding an international solution to taxing the digital economy. This targeted and proportionate digital services tax is designed to keep our tax system in this area both fair and competitive, pending a longer term international settlement."