British plans to introduce a digital or tech tax in April should be delayed until a global consensus is reached, OECD official warns
The United Kingdom has been urged to hold off on its plans to introduce a digital tax in April, by a senior official at the Organisation for Economic Cooperation and Development (OECD).
Speaking to the BBC, the OECD Secretary General Angel Gurria urged the UK to ‘hold fire’ on tech tax planned for April, as there needs to be a global agreement on technology company tax.
It comes after Apple CEO Tim Cook this week said that everyone knows that the global corporate tax system needs to be overhauled.
British digital tax
At the moment, the OECD is developing global reforms over where multinational firms should be taxed.
Tech companies have long been criticised by governments and regulators for their tax practices that sees them reducing their tax bills by booking profits in low-tax countries (such as Ireland) regardless of the location of the end customer.
Efforts to develop wide ranging tax reforms have floundered so far.
In July 2019, Boris Johnson (before he became Prime Minister) had backed a digital tax when he said that the government had to find a way to tax technology giants on their income.
Then in December last year the Prime Minister pledged to press ahead with the implementation of a tech or digital tax on large Internet firms such as Google, Amazon and Facebook, despite US opposition.
The UK had long planned to push ahead with its own national levies, ever since the budget of October 2018.
The Conservative Party had committed to implementing a digital service tax on the revenue of companies if it won the national election in December.
After its decisive election victory, April was slated as the date the tax would be introduced.
“We’ve committed to introduce our Digital Services Tax from April 2020,” the Treasury reportedly said. “It will be repealed once a global solution is in place”.
Under the plan, tech companies that generate at least 500 million pounds a year in global revenue will pay a levy of 2 percent of the money they make from UK users from April 2020.
But now the OECD has urged the UK to hold off implementing the tax.
The OECD’s Secretary General Angel Gurria told the BBC that without a global solution to technology companies paying less than a fair share of tax, there would be a “cacophony and a mess” of 40 countries going their own way with “tensions rising all over the place”.
In regards to the UK plan to levy a 2 percent tax on the UK revenues of tech firms from April, Gurria, said that the government should “absolutely hold fire and contribute to a multilateral solution”.
Macron and Trump reportedly agreed to hold off on a potential tariffs war until the end of 2020, and continue negotiations at the OECD on the digital tax during that period.
“They agreed to give a chance to negotiations until the end of the year,” a source told Reuters. “During that time period, there won’t be successive tariffs.”
Do you know all about IT and the law? Take our quiz.