Tech firms "using coronavirus crisis" to dodge digital services tax

Trade body techUK wants to delay liabilities by a year for the 2% levy on tech giants' revenues

A trade association representing British tech firms is lobbying the government to delay the long-anticipated digital services tax by a year to give companies breathing space amid the coronavirus pandemic.

The 2% levy on the revenues of large internet giants and social media platforms such as Google, Facebook and Amazon came into force earlier this month. It was drawn up in 2018 by the then chancellor Philip Hammond in order to tackle the issue of long-term tax avoidance among businesses with exorbitant incomes. 

The industry body techUK, however, has urged the government to “give companies a bit more breathing space” and delay all liabilities by a year as a result of the economic consequences of COVID-19, according to the Times.

This is a move that tax justice campaigners have branded “completely shameless”, given many of the companies targeted by the digital services tax have established mechanisms to legally minimise tax liability for years.

“The scope of the tax was dramatically extended last month with little warning, meaning that HMRC now expects many more companies across the sector to begin allocating resources to determine liability,” techUK's deputy chief executive Antony Walker told the newspaper.

“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.”

The digital services tax will apply to businesses that provide a social media service, search engine or online marketplace to UK users. Crucially these businesses’ revenues must be more than £500 million globally, with more than £25 million derived from UK users.

The claims made by techUK’s deputy chief have been contradicted by tax experts and campaigners, who suggest there were no dramatic tweaks to the scope of the levy prior to its implementation. 

Those lobbying on the opposing side, moreover, have slammed these efforts to use the coronavirus crisis as cover to enable further avoidance of tax.

“This is completely shameless of the tech companies - even by their low standards,” the chief executive of the Tax Justice Network Alex Cobham told the Times

“This is the industry that has engineered the lowest effective tax rates in the world, declaring their profits in low and no-tax jurisdictions instead of where their real employment and sales take place.”

Businesses of all stripes, including tech firms, have been affected as a result of the spread of coronavirus and resultant lockdown measures. 

Many companies that have harnessed cloud technology and remote working infrastructure, however, have been less badly affected than others. The online-based companies this levy is designed to target, moreover, are likely to be among this category of businesses likely to prosper relative to others. 

TechUK has maintained a longstanding opposition to the additional levy on the largest tech companies. The group claimed in July last year, for example, that any such charge would slow investment and raise consumer costs

Amazon partially reaffirmed this view in January after suggesting it would pass the 2% levy onto sellers that use its platform.

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