According to the Wall Street Journal, dozens of other countries have been looking into similar taxes on digital services sold by these companies in an attempt to capture more revenue from online businesses.
“It’s clearly not sustainable, or fair, that digital-platform businesses generate substantial value in the U.K. without paying tax here,” Philip Hammond, U.K.’s Treasury chief, said on Monday (October 29). He added that while a global agreement “is the best long-term solution,” progress has been “painfully slow.” While the new tax would only be in force until a global solution is found, Hammond said “we cannot simply talk forever.”
As a result, the U.K. said it was moving forward with a plan to begin a digital tax for large tech firms by 2020.
The government of Spain has proposed a similar tax, which still requires parliamentary approval.
The new U.K. tax puts pressure on other countries to come to an agreement on a global digital tax. The Organization for Economic Cooperation and Development, a forum of wealthy countries, has been leading the international digital tax talks.
Spokespeople for Amazon, Facebook and Google's parent company Alphabet had no immediate comment on the new U.K. tax. The U.S. Treasury also didn’t immediately comment on the report.
In the meantime, critics in the U.S. have warned that the new tax could result in retaliatory taxes in the states, and that there is also the risk that the tech companies could simply pass the added costs onto their customers.
“This proposal could disproportionately affect American companies and may ultimately wind up interfering with the U.K.’s trade commitments,” said Rufus Yerxa, president of the U.S. National Foreign Trade Council. “If enacted, this measure could also complicate the United Kingdom’s push for deeper U.S.-U.K. trade relations.”