The latest levy for tax on digital services, which came into force at the start of the month, amounts to 2% on the revenues of social media platforms, online marketplaces and search engines.
The tax, which was introduced in order to address a “misalignment between the place where profits are taxed and the place where value is created”, will now affect at least 30 companies in the tech sector with over £500 million in global revenue.
However, companies affected by the tax, which include Facebook, Google and Amazon, have responded by claiming that the tax policy has been updated at a time of stretched resources and doubt regarding future financial outlook due to the coronavirus pandemic.
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Antony Walker, deputy chief executive of TechUK, said: “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.
“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.”
These claims from the tech sector has been criticised by campaigners, who have declared them as “shameless” and “distasteful”, while accusing tech giants of exploiting the current situation in order to avoid paying tax.
Additionally, Matthew Herrington, international tax partner at KPMG, said that the scope of the digital services tax has not changed dramatically, but had widened as a result of “welcome clarifications and confirmations around scoping” on the part of the government.
Tech giants’ responses to the pandemic
Facebook, as well as its messaging-focused subsidiary WhatsApp, has recorded a rise in usage since the coronavirus pandemic took hold.
With its services being used to share conspiracy theories relating to COVID-19, the platform has stated that it is taking steps to deal with misinformation. Additionally, Facebook has pledged to donate cash grants and ad credits to small businesses affected by the outbreak.
Google, meanwhile, have responded by replacing adverts promoting for-profit sites with government sites and genuine news about the coronavirus, and have pledged $800 million towards aid for small businesses.
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As for other tech giants, a consortium, including Amazon, has been established to help the NHS predict which spots are most in need of hospital beds, ventilators and staff.