UK: Gov facing pushback for tax on tech companies’ revenue

The UK is facing pushback by lawmakers in the US and lobbyists who contend a new tax on some of the world’s biggest internet companies would create what is seen as a dangerous precedent.

According to the Financial Times,  which cited Tom Donohue, president of the US Chamber of Commerce — lobbyists and lawmakers, Donohue and others think the tax would target big American technology companies unfairly. In a letter to Treasury Secretary Steven Mnuchin, Donohue said, “the American business community supports international dialogue on ways to modernize the international taxation system to adapt to changes in the global economy. Unilateral European actions will erode trust and lessen the prospects for the international agreement; indeed, we now see governments outside of Europe considering similar actions.” Meanwhile, a Republican Senate aide told the Financial Times that senators have urged the EU to get rid of a similar plan, arguing it will create a new transatlantic trade barrier and target US companies.

Earlier this week the UK announced it was aiming to lodge a 2% tax on the UK-generated revenues of search engines, social media companies, and online marketplaces if revenue on a global basis is more than £500 million (US$638.5 million) a year and the company is profitable. The UK is among several countries that are looking at overhauling their tax codes to capture more revenue from the likes of Facebook, Amazon, and Google.

Josh Kallmer, head of policy at the Information Technology Industry Council — which counts Google, Apple, and eBay as members — argued the tax idea misunderstands how business is conducted. “Virtually any company that does business across borders is digital to significant degree,” he said in the report, noting it could result in the tax applying to companies that aren’t traditionally viewed as tech companies. The report noted its not clear what financial impact the UK tax would have on the tech companies, but it did say the tax will apply to 30 if not more tech companies, generating £400 million (US$510.7 million) a year by 2023. That would imply that on average, each affected company will pay an additional (US$16.6 million), noted the report. For US companies it could be a lot higher given the size of their revenue.

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