The British Government today announced its intention to levy a tax on digital services. The decision could be good for a tax of hundreds of millions of dollars a year. Tech companies will soon have to pay up to 2% tax on certain income they generate within the United Kingdom.

That is what the BBC is reporting today in a comprehensive report on the British government’s tax plans. The intention would be to levy a 2% tax on companies such as Alphabet and Facebook. In this case, all online activities of tech companies would be affected by the measures.

Spare startups

The United Kingdom is planning to levy taxes on social media, display advertising in addition to search results and transactions carried out on online marketplaces by the British. However, the latter tax measure is limited to British sellers, which means that a company like Amazon is likely to suffer less damage than Facebook.

In any case, the plan is to raise between GBP 400 million a year with this tax measure. In order to protect startups, the measures would only apply to profitable companies with a worldwide turnover of at least £500 million.

Changing posture

If the measure is taken, it can be seen as the beginning of a change in the attitude of governments towards tech companies. Taxes are levied in most parts of the world on the basis of a company’s profit, not its turnover. This mainly works in favour of large companies, which often make hardly any profit with complex constructions.

For example, last year Amazon paid a total of GBP 4.5 million in tax on a British turnover of GBP 8.7 billion. Google received a tax assessment of 49 million pounds on a turnover of 7.6 billion pounds in Great Britain. That’s not much, and governments want to change that. It is not only the British who are considering this measure; the European Union, too, would consider levying a 3% tax on the regional turnover of tech companies. Countries such as Singapore and India want to levy similar taxes.

This news article was automatically translated from Dutch to give Techzine.eu a head start. All news articles after September 1, 2019 are written in native English and NOT translated. All our background stories are written in native English as well. For more information read our launch article.