back to article UK.gov fishes for likes as it prepares to go solo on digital sales tax

Critics have complained that the UK government's proposed digital services tax is complex, confusing and off-putting for international business. Announced by chancellor Philip Hammond in the budget, the tax aims to address what UK lawmakers see as holes in the international tax framework, which they say fails to recognise the …

  1. }{amis}{ Silver badge
    Thumb Up

    Mihn Gott!!

    How very dear you sir implement a tax in a place where our lobbying dollars are not working well enough to stall all progress.

    Seriously new tax or not does anyone think that the megacorps are going to walk away from the potential profits of the worlds 7th larget economy??

    1. Flocke Kroes Silver badge

      Re: Mein Gott!!

      I think they will just pass the tax straight on to UK customers and businesses (who will pass it on to their customers).

    2. Spazturtle Silver badge

      Re: Mihn Gott!!

      Who cares if they do walk away? Foreign companies that are a net drain on this country should be kicked out to begin with.

      If they walk away in response to this tax then we will still be better off then before.

      1. codejunky Silver badge

        Re: Mihn Gott!!

        @ Spazturtle

        "Who cares if they do walk away?"

        The people who want and use those services. The consumers who enjoy the products and services available.

        "Foreign companies that are a net drain on this country should be kicked out to begin with."

        And who decides what is a net drain? Take Google and Facebook. We all have equal access to it regardless of our incomes, the facility to chat and share images, find information and various services made available. They employ people, assist commerce and are popular. So not a drain and successful.

        "If they walk away in response to this tax then we will still be better off then before."

        The good old days where tax was high, life sucked and the coffers lost out and so did the people. Is tax to bring in revenue or to push out those who are successful?

        1. Spazturtle Silver badge

          Re: Mihn Gott!!

          "The consumers who enjoy the products and services available."

          Then those who want those services can use a competitor who does pay tax on the money they make.

          "Take Google and Facebook. We all have equal access to it regardless of our incomes"

          We all have access to it because we all pay for it in lost tax revenue, even people who don't use it are paying for it. People who can't even afford food and rent are being forced to pay for facebook and youtube though services they depend on having their budgets being cut due to Google and Facebook avoiding paying tax on the money they make.

          "And who decides what is a net drain? ... They employ people, assist commerce and are popular. So not a drain and successful."

          They remove more money from the economy then they put in, that makes then a drain.

          1. codejunky Silver badge

            Re: Mihn Gott!!

            @ Spazturtle

            "Then those who want those services can use a competitor who does pay tax on the money they make."

            Sure. Who? There seems to be a gap there and if a tax paying (they already are btw) version is better then where is it? Why are people not moving to it?

            "We all have access to it because we all pay for it in lost tax revenue, even people who don't use it are paying for it."

            That makes no sense. How can people who dont use it pay for it because the tax man doesnt steal more from them? It is not lost tax revenue because the state has no legal claim by their own set of rules to take that money by force (aka tax).

            "They remove more money from the economy then they put in, that makes then a drain."

            So their value doesnt matter? The actual service and benefit they provide isnt to be taken into account only the monetary value. That is very restricting to an enjoyable life. Lets not go that way

    3. Tigra 07 Silver badge
      Headmaster

      Re: Mihn Gott!!

      "Seriously new tax or not does anyone think that the megacorps are going to walk away from the potential profits of the worlds 7th larget economy"

      We're the 5th largest economy in GDP terms, but your point still stands.

      1. }{amis}{ Silver badge
        Coat

        Re: Mihn Gott!!

        Sorry I got that no 7 figure from the top search hit and didn't really look at the publisher: CNN Money: World's largest economies

        1. Tigra 07 Silver badge
          Trollface

          Re: Mihn Gott!!

          CNN? Fake News!

  2. steelpillow Silver badge

    Too complicated

    means the big boyz'n'girlz will lawyer it into a bottomless pit. Nice for the legal profession, f*** all use to anybody else.

    If it is ever to work, then KISS applies.

    For example why not just tax company revenues based on the UK share of their global user base? OK it's probably not /that/ simple, but the principle is there.

    1. John Robson Silver badge

      Re: Too complicated

      Monetisation is basically via adverts...

      So tax advert *display* rather than sales. Then the adverts are taxed in the regime they are used for monetisation...

      1. Anonymous Coward
        Anonymous Coward

        Re: Too complicated

        Taxing all advertisements would cure a lot of problems - no just on-line adverts, tax them all, everywhere - anything that goes one step beyond providing information ... oh but wait, this means that we'd have to tax political adverts too - OK, forget it.

      2. David Nash Silver badge

        Re: Too complicated

        "So tax advert *display* rather than sales."

        That won't help tax companies that do sell stuff, or enable selling of stuff. eg. Amazon, Ebay.

        1. Cynic_999 Silver badge

          Re: Too complicated

          "That won't help tax companies that do sell stuff, or enable selling of stuff. eg. Amazon, Ebay."

          The government gets sales tax from online retailers, which is effectively 20% of UK based *turnover*. Just how much more do you think the government ought to get? To my mind, 20% profit on all sales while doing fuck-all to either facilitate or earn it is far more than enough.

          Maybe stop to think that maybe it is the huge amount of tax that UK citizens pay directly or indirectly that is causing recession and the lowering of our standard of living. At least 80% of what you earn is currently taken by the government in one way or another (just do a bit of arithmetic), and it's over 90% for many people.

          Now while I understand that we need to pay the government to provide general infrastructures and services, I do not accept that the government is providing anything close to 80% of the needs of the average citizen. Just a few rough calculations make me pretty certain that the majority of our tax money must be disappearing into quite a few "black holes" and is *not* being used to benefit us (the ordinary citizen) in any way whatsoever.

          1. Yet Another Anonymous coward Silver badge

            Re: Too complicated

            >The government gets sales tax from online retailers,

            But gets 0% of Google's ad sales to UK business (all happen in Eire), 0% of Amazon and Netflix's video (all in Luxemburg) and little of Amazon/Microsoft/Googles cloud services sales to UK busiensses

          2. John Robson Silver badge

            Re: Too complicated

            VAT isn't a tax on their turnover, and they don't pay any, they reclaim it all...

            I had missed the sales of cloud services... That's certainly more complex.. but let's deal with the big (and easy) problem of adverts first.

            The issue of selling digital services is complex, particularly when multinationals sell to other multinational companies...

  3. SVV Silver badge

    Industry mouthpiece TechUK sound like idiots

    I mean, obviously they are lobbying in their members' interests as that's their job, but they'll have to come up with some better objections than that if they they want to be taken seriously.

    To claim that differentiating between two different types of sales transactions in a database based system is "difficult" and could be significantly expensive to implement is ridiculous. As if most databases would not currently be able to differentiate between the two with a simple SQL query? I doubt these companies databases are not up to the task. And if for some extraordinary reason they weren't, surely a simple transaction_type column in a sales item table would solve the problem.

    Represent your clients by all means, but don't think up excuses that make them look like incompetent idiots in technological savvy terms, when they're not. It's not a good look.

    1. I ain't Spartacus Gold badge

      Re: Industry mouthpiece TechUK sound like idiots

      The idea that companies don't already generate all this kind of information for internal management purposes is frankly ludicrous.

    2. Doctor Syntax Silver badge

      Re: Industry mouthpiece TechUK sound like idiots

      "Represent your clients by all means, but don't think up excuses that make them look like incompetent idiots in technological savvy terms"

      No need to do that at all. Said clients manage to do that all by themselves.

      Take their "recommendations" for a start. You may be interested in whatever it was I made a one-off purchase of.

      The chaos resulting from a failed delivery to an Amazon locker which results in a courier being tasked to come to the door to collect the item that wasn't delivered because they treat non-delivery as a return.

      The spamming for feedback which, should I ever consent to click in a link in a spam, is only going to result in score that represents the negative customer service that is spam.

      The failure to notice that an item hasn't legitimately moved out of (and probably can't be found in) the depot where it's recorded as having arrived at and should be delivered from.

      The battery of estate agents' ads that follow any search for information about a specific place.

      And more and worse besides.

      1. DavCrav Silver badge

        Re: Industry mouthpiece TechUK sound like idiots

        "You may be interested in whatever it was I made a one-off purchase of."

        I've only recently started seeing fewer advertisements for baths, after buying a bath. I mean seriously, whose bath is so good they run off and buy another one after a few weeks?

  4. naive

    Like they can get their revenue somewhere else

    This is utter non-sense: "Critics warn it's complex and off-putting for international firms"

    Look at the world map, identify the places where big-tech can make decent revenues and profits.

    The part where they can is shockingly small, and the good news: England and Europe are in this spot.

    So don't worry, taxation won't drive them away, there is USA and Europe, the rest doesn't have the cash, or doesn't want to do business since they are Chinese protectionists.

    1. Anonymous Coward
      Anonymous Coward

      Re: Like they can get their revenue somewhere else

      I assume the fear is not that they will stop doing business in the UK, but rather that they will not place their headquarters in the UK. They might not pay much taxes, but they do hire a lot of people.

      1. I ain't Spartacus Gold badge

        Re: Like they can get their revenue somewhere else

        I don't know if it's in the plan, but surely the way to do this is to give companies a choice. Pay corporation tax here - showing their workings so they actually can't get away with making no profit, or pay this levy.

  5. ratfox Silver badge
    Paris Hilton

    The government makes a stab at defining each of the three groups – social media platforms, online marketplaces and search engines – it is seeking to tax

    Isn't it simpler to just say they want to tax Facebook, Amazon and Google?

    1. Jon 37

      Picking out 3 specific companies to tax would be illegal. Defining 3 new categories of companies to tax, which includes just those 3, is legal.

  6. Doctor Syntax Silver badge

    "Spreadsheet Phil hopes that it will bring in £5m in 2019-20, rising to £275m the next year and to £440m by 2023-24."

    Has there ever been a Treasury prediction that didn't look more optimistic the further it got into the future? And has any Chancellor ever presented the eventual result to Parliament with a comparison of the predictions of one, two, etc. previous years?

    1. Anonymous Coward
      Anonymous Coward

      "Has there ever been a Treasury prediction that didn't look more optimistic the further it got into the future?" - Er, Brexit?

    2. codejunky Silver badge

      @ Doctor Syntax

      "Has there ever been a Treasury prediction that didn't look more optimistic the further it got into the future?"

      Well said. Its easy to assume people will be willing to pay more tax, in practice it often falls very short and just makes things more complex for those who try to succeed.

    3. Anonymous Coward
      Anonymous Coward

      This smacks of being seen "To Be Doing Something", after all £440M a year is chump change in the overall scheme of things - it's only about 8.5 days worth of money promised to the NHS.

  7. steviebuk Silver badge

    Tax isn't my strong point...

    ..but isn't this a shit idea.

    Not that I'm defending the likes of Facebook or Google but you use their services for free. It costs them shed loads to manage the servers and bandwidth you produce so to make that service available, for free, they just show you ads and maybe use your data that (as long as you consent to it) to sell to others. Yes I'll get down votes for that as we all know Facebook and Google have been abusing the consent.

    But still. If these services are available for free, you choose to use or not use it. So how can you tax someone that provides a service for free, just because they then make money of you using their service for free?

    I don't get it. Does this mean they'll start to tax Steam. And will those companies then just pass the tax onto their users?

    1. Spazturtle Silver badge

      Re: Tax isn't my strong point...

      A UK company places an advert on Google Ads for £10k to be shown on other UK websites to UK viewers, Google pays £0 tax on that. With this proposed tax they would pay £200.

    2. SImon Hobson Silver badge

      Re: Tax isn't my strong point...

      you use their services for free

      As you point out, it's not free - there's a real cost involved. What is missing (and I doubt will ever be provided until GDPR really catches up with them) is an option to pay real cash and not be slurped.

      they just show you ads and maybe use your data that (as long as you consent to it) to sell to others

      If only that were what they do. If all they did was show you ads then fine, but they don't. Untargetted ads are worth little, the big money is in showing ads carefully matched to the data they've slurped on you. And there's never any element of consent - both Google and Facebook will slurp data on you without you ever having an account or ever consenting to them doing it.

      One thing that's "irritating" me at the moment is the number of sites where they say "we use these third party cookies, if you want to stop them then you go to the third party and tell them to stop". Great, so to stop Faecesbook tracking you, you'd have to create an account on Faecesbook (because they'll ignore you otherwise) - but to do that you have to agree to their Ts&Cs which give them permission.

      So how can you tax someone that provides a service for free, just because they then make money of you using their service for free?

      Note that the money isn't made from people using their services (at least with Google) - Google makes money by showing adverts to you on every f***er elses' websites. So even if you have never ever, not even once, used any "free" Google service - they will still be making money from your data because of the sites you do visit showing ads that they get paid for.

      For good measure, Google in particular is very good at using it's clout (particularly it's dominance in search) to take over any market it wants to. There were other mapping tools around, and some of them have managed to survive so far - but when Google started giving mapping away free* by using cross subsidies from it's massive marketing bis, they had an advantage over anyone else. So some other company could have a great idea - but because they don't have the backing of something the size of Google, there's no way they can both develop it and give it away free. Thanks to short sighted sheeple thinking "ooh, free", other offerings have tended to wither away, or limp on with little development, or stick to a niche commercial market - leaving Google to monopolise that market and then use it's dominance to a) push adverts to further it's own business, and b) keep any upstarts from succeeding. The USA has laws specifically to deal with this sort of behaviour - but a poor track record of actually doing too mush of practical use with those laws, c.f. Standard Oil, IBM, Microsoft who all avoided any significant penalty for blatant abuse of a dominant position in one market to give themselves a leg up in another.

    3. David Nash Silver badge

      Re: Tax isn't my strong point...

      "So how can you tax someone that provides a service for free, just because they then make money of you using their service for free?"

      Because, as you said, "they then make money".

      You might have noticed that making money is one of the main things that incurs a tax. Doesn't matter how you make it. Unless you're a charity or similar, make money=pay tax. That's the point here.

      1. 335/113

        Re: Tax isn't my strong point...

        You are quite right that making money is one of the main things that incurs a tax; but not that make money=pay tax. Spending money is another main thing that incurs a tax. Or living somewhere. Or dying. (I'm retired, obviously...).

        I do like your point, but I'm not comfortable with the idea that behemoths provide their services for free. They use, or exploit, our tax-funded infrastructure: like education, for just one example.

  8. codejunky Silver badge

    Hmm

    "The measures didn't receive a particularly warm welcome when they landed earlier this month, with complaints that – in light of Brexit – the UK shouldn't be making it more unappealing for digital firms to set up shop."

    In light of brexit or not no. Punishing a few firms because they are successful is stupid and could push them away. Lets think that through, push away jobs/services/products/R&D all of which generate tax revenue. Or we can punish success because it makes some people 'feel' better.

    1. Version 1.0 Silver badge

      Re: Hmm

      Taxation is not punishment - so, if you don't want to raise money by taxing success, are you proposing that we should raise money by taxing (aka "punishing" in your world) failure?

      Let's look at all the services that the UK provides these vendors that they don't pay for - the internet to communicate with their customers, security to ship and deliver goods without concern about loss, a legal system that enables them to ensure that they get paid, and a waste disposal system that disposes of the shipping materials .... etc., etc.

      1. codejunky Silver badge

        Re: Hmm

        @ Version 1.0

        "Taxation is not punishment"

        Actually that is flat out wrong. Just as a statement 100% incorrect without wiggle room.

        "so, if you don't want to raise money by taxing success, are you proposing that we should raise money by taxing (aka "punishing" in your world) failure?"

        A binary choice where there is none? Punishing success has been proven and demonstrated to deter such. That again is not something in question. When hard work is punished (the returns from it stolen in larger amounts) fewer bother and so we have less products/services we want and less tax revenue.

        "Let's look at all the services that the UK provides these vendors that they don't pay for"

        Lies, lies and outright lies. They do. And worse than that it is people who pay not a company or business. It is people who work to make money to spend and so it is money from peoples pockets.

        1. David Nash Silver badge

          Re: Hmm

          That's just BS. Are you saying that the income tax I pay on my salary is punishment for working?

          No, because if I didn't work not only would I not pay the tax but I wouldn't get the salary either.

          Tax is not punishing success. It's one of the costs of doing business, of which there are many.

          1. codejunky Silver badge

            Re: Hmm

            @ David Nash

            "That's just BS. Are you saying that the income tax I pay on my salary is punishment for working?"

            Yes. Do you need proof? Lets tax you 90% and see how much working (on the books) you do. It is a disincentive which is why you see tax rise on 'sins' such as tobacco and alcohol or bad behaviour e.g. co2 etc. Collectively we accept an amount of taxation to pay for things, but we want it to be least disruptive as possible.

            The window tax for example brought about a lot of bricked up windows (punished windows and not the OS). Unfortunately in greed we also have punishments against successes because it is easier to sell to voters the idea of punishing those more successful than themselves. In your words its a cost of having windows, in reality it removed a lot of windows due to the punishment.

            1. DavCrav Silver badge

              Re: Hmm

              "Yes. Do you need proof? Lets tax you 90% and see how much working (on the books) you do. It is a disincentive which is why you see tax rise on 'sins' such as tobacco and alcohol or bad behaviour e.g. co2 etc. Collectively we accept an amount of taxation to pay for things, but we want it to be least disruptive as possible."

              You are right that tax is a disincentive. It however isn't a punishment. I cannot believe you cannot tell the difference between those two words. Traffic is a disincentive to driving at rush hour, but it isn't a punishment for driving at rush hour.

              1. codejunky Silver badge

                Re: Hmm

                @ DavCrav

                "Traffic is a disincentive to driving at rush hour, but it isn't a punishment for driving at rush hour."

                Yet the congestion charge is a punishment on Co2 producing vehicles. It isnt about congestion as it is Co2 output based and the mayor is moaning that electric vehicles will take away his source of revenue.

                By the way punishment is used as a disincentive for behaviours.

                1. DavCrav Silver badge

                  Re: Hmm

                  "By the way punishment is used as a disincentive for behaviours."

                  Yes, but not all disincentives are punishments. Jesus wept.

    2. DavCrav Silver badge

      Re: Hmm

      "Punishing a few firms because they are successful is stupid and could push them away."

      So Amazon, Facebook and Google leave the UK market entirely because of a tiny little tax? OK, I'll believe that when I see it. They aren't headquartered here so can't move that. They employ very few people here anyway, so cannot fire those out of spite.

      1. codejunky Silver badge

        Re: Hmm

        @ DavCrav

        "So Amazon, Facebook and Google leave the UK market entirely because of a tiny little tax?"

        Nope. They already pay tax. And now you want them to pay more, why dont you instead? Its only a little more, and a little more, and a little more. At what point do you say no more? At what point is it a little more to the person not paying but not to those who have to pay?

        "They employ very few people here anyway, so cannot fire those out of spite."

        Why not? Thats a bad assumption.

  9. LucreLout Silver badge

    Usual fud and ignorance abound

    Sorry, but there will be no cost to the corporations, and no revenue raised. Or better put, not the intended targets of the tax at least.

    Some facts:

    1. DST is only intended to run until OECD/G20 tax comes in.

    2. DST is in consultation with a 2020 implementation date.

    3. OECD is in consultation also with a 2020 implementation date.

    4. DST has a "safe harbour" exemption for those of a loss making persuasion.

    5. There is no requirement to have a legal entity registered in the UK in order to have a web site accessible from the UK.

    6. DST is intended to raise £400M

    7. We have no means of determining how much Google makes from UK search Vs its Android division or any of the other letters in the Alphabet Soup.

    Thus, we can determine the following opinions:

    DST will cost the Treasury a lot of money (fact 1) and in all likelihood raise nothing because we'll implement OECD by the time DST is ready (facts 2 & 3).

    Amazon won't pay a penny in DST because it makes a loss (facts 4 & 7). Google can probably restructure to achieve the same thing (facts 5 & 7). Apple might take a hit, but barely; we can't actually force companies to register for some type of self assesment by which we could calculate their DST if they don't require a physical presence here.

    They're avoiding what is frankly a trivial tax split between even just the 4 main players (fact 6).

    It makes for a good announcement but will in all likelihood either only raise revenue from unintended targets (How many web sites have a search feature that isn't google? Digital publishing step right up), or would in any case raise less than MPs spend on their own pensions.

  10. Anonymous Coward
    Anonymous Coward

    FUD and Ignorance

    LucreLout opined "Amazon won't pay a penny in DST because it makes a loss"

    Failure to comprehend that revenue is not profit, you are guilty as you charged others!

    1. LucreLout Silver badge

      Re: FUD and Ignorance

      LucreLout opined "Amazon won't pay a penny in DST because it makes a loss"

      Failure to comprehend that revenue is not profit, you are guilty as you charged others!

      See fact #4 in the list above. If you can't read, try not to write. There's a good chap.

      1. David Nash Silver badge

        Re: FUD and Ignorance

        Seeing as how this whole situation has arisen because these companies use various mechanisms to ensure they make a loss and that is why they don't pay tax, I think it would be extreme incompetence on the part of whoever drafted this proposed legislation, if such a loophole applied.

        1. LucreLout Silver badge

          Re: FUD and Ignorance

          Seeing as how this whole situation has arisen because these companies use various mechanisms to ensure they make a loss and that is why they don't pay tax, I think it would be extreme incompetence on the part of whoever drafted this proposed legislation, if such a loophole applied.

          Disallowing such a loophole, and I agree that this is what it is, would be the immediate death of our on-shore startup industry, whom we're not specifically targetting with the tax.

          DST is utter junk and Hammond knows it. Which is why I'm reasonably sure it'll be dropped during consultation awaiting the OCED version, which might achieve their goals, at least in part.

  11. Lloyd

    So tax avoidance will be unaffected then

    Phew, Phillip Green will be happy.

  12. NeilPost

    Sleeps it simple stupid

    Keep it simple - for this sort of activity, apply 25% VAT and not 20%.

  13. Anonymous Coward
    Anonymous Coward

    Easily avoided in the cloud

    A reasonable amount of international business that rides on top of AWS can just migrate from eu-west-2, to Ireland or Paris in a one line code update.

    Problem, largely solved.

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