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Tech firms plea to dodge new UK digital services tax

Technology firms including Facebook, Google, Apple and Amazon have pleaded that they should not have to pay a newly-imposed UK digital services tax.

Trade body TechUK, which represents hundreds of technology companies in Britain including the four giants, said the Government should ‘look again’ at the new levy.

It has asked for ‘a bit more breathing space’ by liabilities being delayed for a year, with the tax expected to generate £440million for the Treasury.

But the plea was criticised today as a ‘shameless’ attempt to exploit the coronavirus pandemic which has already resulted in more than 11,000 deaths in Britain.

Members of staff stand outside the Apple Store on Regent Street in London on March 14 as they tell customers that the shop is shut in response to the coronavirus pandemic

Members of staff stand outside the Apple Store on Regent Street in London on March 14 as they tell customers that the shop is shut in response to the coronavirus pandemic

Members of staff stand outside the Apple Store on Regent Street in London on March 14 as they tell customers that the shop is shut in response to the coronavirus pandemic

The 2 per cent tax came into force this month as the Government tries to clamp down on profits and cash being moved to countries with lower tax levels.

It will affect at least 30 firms with more than £500million of global revenues, but TechUK said it fears more companies will be caught by the tax than intended. 

The new levy will mean California-based Google alone will see 2 per cent of its £1.6billion sales in the UK taxed, bringing in an extra £32million for the Treasury.

But the firms have asked that payment should be delayed as the pandemic stretches their resources and provokes concerns about future revenue, reported The Times

TechUK deputy chief executive Antony Walker said: ‘HMRC now expects many more companies across the sector to begin allocating resources to determine liability.

Packing and processing at an Amazon fulfilment centre in Peterborough in November 2017

Packing and processing at an Amazon fulfilment centre in Peterborough in November 2017

Packing and processing at an Amazon fulfilment centre in Peterborough in November 2017

‘This is all at a time when, due to Covid-19, resources are stretched and future revenue is uncertain. The Government is creating a large degree of uncertainty. 

‘It would therefore be wise to seek to look again at how the tax has been designed and how and when it should be implemented.’

But George Turner, director of investigative think tank Tax Watch UK, said: ‘It is pretty distasteful to see lobbyists attempt to use this unfolding tragedy to extract millions from the taxpayer on behalf of their very wealthy clients.’

And Alex Cobham, chief executive of campaign group Tax Justice Network, added: ‘This is completely shameless of the tech companies — even by their low standards.’ 

The Google offices for its UK arm at Granary Square in London are pictured in November 2018

The Google offices for its UK arm at Granary Square in London are pictured in November 2018

The Google offices for its UK arm at Granary Square in London are pictured in November 2018

Paul Monaghan, chief executive of tax transparency campaign group Fair Tax Mark, told MailOnline the move by TechUK is ‘reminiscent of the two-faced whisperings in the shadows of Big Tobacco over recent decades.’ 

Tech firms, tax and the coronavirus pandemic 

Facebook: Voice and video calls on Messenger and Whatsapp are at more than double usual levels. Facebook’s UK branch paid £28 million in corporation tax in 2018. It had pre-tax profits of £97m and UK revenues of £1.6billion. The company says it is taking steps to deal with coronavirus conspiracy theories circulating and has given cash grants and ad credits to thousands of small firms.

Amazon: Lockdown has caused a huge leap in online shopping but the company has been criticised  for an alleged lack of safety precautions at its warehouses during the pandemic. Amazon UK Services paid £14m in taxes in 2018, when it had a pre-tax profit of £75.4m and a turnover of £2.4bn, about a quarter of Amazon’s UK sales. It is helping the NHS to predict where ventilators, hospital beds, and medical staff will be most needed.

Google: Google searches of ‘coronavirus’ no longer show adverts or recommendations or links to profit-seeking sites. News, government sites, health services and approved advice on prevention are prioritised instead. The tech giant pledged $800m of to small businesses during the crisis. It paid £44m in corporation tax in 2019. The UK branch recorded £1.6bn in revenue.

Apple: Apple paid £3.8m in UK tax in 2018. It had £1.2bn in sales, and its pre-tax profits were £33.7m. The European Commission ruled that Apple’s banking of European profits in Ireland is unlawful. It must pay £12.3bn in back taxes and interest.  Apple is collaborating with Google to add software to smartphones that could make it easier to track down people who may have been infected with with the novel coronavirus. The firm has donated PPE to US healthcare workers in America and medical supplies to Italy.

He added: ‘They are lobbying in the UK to kill the digital services tax, which is already pretty weak-kneed at just 2 per cent of income.

‘TechUK is even demanding that the US multinational tech giants should be exempt from the proposals for a new minimum corporation tax in each country, which is designed to undermine the tax dodging of the silicon giants and their use of tax havens.’ 

However a source at one of the tech giants said it was ‘really surprised’ by TechUK’s announcement and it was not something their company wishes to be drawn into. 

The Organisation for Economic Cooperation and Development is currently working to develop a new international framework for how digital companies are taxed. 

Google, Apple and Facebook declined to comment to MailOnline this morning, while Amazon has also been asked for its response. 

However a source at Facebook said the statement issued by TechUK ‘isn’t a statement we support, have signed up to or were consulted on’.

They added that TechUK represents hundreds of smaller technology companies, which are likely to be those that the group is thinking of – rather than the giants.

Last week it emerged Google paid only £44 million in corporation tax in the UK last year while its staff in Britain earned an average of £234,000 per person.

Its UK arm spent more than £1billion on pay and bonuses in the year to the end of June 2019, up by a quarter from the £829million figure in the previous year.

Google’s UK operation is mainly used as the marketing and sales division of its European operation, which is headquartered in Dublin, where taxes are lower.

On Saturday, Google and Apple announced a joint effort to help public health agencies worldwide leverage smartphones to contain the pandemic.

New software the companies plan to add to phones would make it easier to use Bluetooth technology to track down people who may have been infected.

The idea is to help national, state and local governments roll out apps for so-called ‘contact tracing’ that will run on iPhones and Android phones alike.

The technology works by harnessing Bluetooth signals, with contact-tracing apps gathering a record of other phones with which they came into close proximity.

Such data can be used to alert others who might have been infected, after the phones’ owners get the app and agree to share data with public health authorities.

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