Spring Statement: Tax tech giants’ revenue, suggests Hammond Technology giants may be forced to pay significantly more tax, as the Chancellor seeks to ensure multinational business pay their […]

Technology giants may be forced to pay significantly more tax, as the Chancellor seeks to ensure multinational business pay their fair share.

Under current UK law, tech firms including Apple, Facebook, Google and Amazon are required to pay corporation tax on profits. The companies are regularly chastised by pressure groups, the government and HMRC for the low rates of tax they pay abroad, an issue Philip Hammond first addressed in the Autumn Statement.

“Multinational digital businesses pay billions of pounds in royalties to jurisdictions where they are not taxed, and some of these royalties relate to UK sales,” Mr Hammond said in November.

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“So from April 2019, and in accordance with our international obligations, we will apply income tax to royalties relating to UK sales, when those royalties are paid to a low tax jurisdiction.”

The amount of tax primarily American tech giants pay in the UK has been a source of contention for the government and HMRC for years. Ireland charges lower rates of corporation and income taxes than the majority of European nations, including the UK.

Mr Hammond suggested interim measures of taxing digital businesses on their revenues, which would target multinationals while simultaneously protecting start-ups in a consultation paper accompanying the Spring Statement.

“The current misalignment between where digital businesses are taxed and where they create value threatens to undermine the fairness, sustainability and public acceptability of the corporate tax system,” he added.

More than 1.5m people work within the tech sector in the UK and accounted for £6.8 bn of investment in 2016, 50 per cent higher than any other European country.

The rate at which the sector has developed has outpaced the tax system, particularly with regard to the boom in businesses such as Facebook and Google where value creation is in part reliant on the engagement and participation of users.

Tech giants have long been targeted for failing to pay equivalent amounts of tax on the billions of pounds they generate within the UK each year. Facebook paid just £5.1m in corporation tax in 2016, despite revenues rising to £842.4m, while Amazon managed to slash its corporation tax bill in half to £7.4m by awarding its employees shares, which are deductible from future tax bills.

Mr Hammond’s announcement is a clear delineation of the UK’s toughening stance towards big tech, which he said sought a “multilateral solution” ahead of the OECD (Organisation for Economic Co-operation and Development) and G20 meeting in Argentina next month.

It is not, however, the government’s finalised position on the issue of digital taxation, he added, instead reflecting “updated thinking”.

European Union member states are currently prevented from charging additional tax under the EU VAT directive, but Britain could technically seek to add tax on business revenues following its format exit from the European Union next year.

France, Italy, Spain and Germany have voiced their support for taxing tech company revenues, with French finance minister Bruno Le Maire calling for “fair taxation of digital giants that creates value in Europe” last month.