26/02/18

Internet giants could lose their offshore tax loophole

(The Times) -- Technology companies operating in Britain are facing a new tax on revenues after a treasury minister said such a levy was the “potentially preferred option”.

Last Wednesday, Mel Stride, financial secretary to the treasury, raised the prospect of a major tax reform for multinational companies who use complex webs of subsidiaries to funnel billions in profits from UK sales offshore.

The overhaul could be announced as soon as next month, in the spring statement on March 13.

Under the present system, tax is deducted from profits rather than sales. However publishing and tech companies such as Facebook and Google have legally minimised corporation tax through complex schemes that involve booking sales to UK customers in lighter tax jurisdictions such as Ireland.

A consultation paper published by the government last year said that it would “explore interim options to raise revenue from digital businesses that generate value from UK users, such as a tax on revenues that these businesses derive from the UK market.”

The rate of a revenue-based tax would be “at a level that raises material revenue in a way that is fair, non-distortive and applicable to business models with different profit margins”.

Mr Stride, 56, told the BBC: “At the moment [some tech companies] are generating very significant value in the UK. You’re looking at social media platforms, online marketplaces, internet search engines, where at the moment the tax regime is not taxing those activities fairly.”

He said a tax on revenue was the “potentially preferred route to go”, but stressed the government did not want to pursue any move that would strangle smaller start-ups or harm companies struggling to make a profit.

The minister made clear he was “not talking about tax avoidance, evasion or non-compliance, we’re talking about the way the system works”.

All the tech companies that have faced controversy have made it clear that they abide by the present tax rules.