UK will impose 'digital services tax' on tech giants even if other countries won't, says Philip Hammond

Chancellor likens dominance of a handful of internet giants to fears about 'Standard Oil and the railroad cartels' in 19th century America

Rob Merrick
Deputy Political Editor
Monday 01 October 2018 17:38
Comments
Philip Hammond threatens to impose new tax on technology giants

Britain will impose a new “digital services tax” on the tech giants even if other countries fail to act, the Chancellor threatened.

Philip Hammond likened the dominance of a handful of internet giants to fears about “the near-monopoly of Standard Oil and the railroad cartels” in 19th century America.

In his conference speech, Mr Hammond announced that a former economist to President Obama would investigate whether changes were needed to make competition policy “fit for the digital era”.

And he said: ‘The best way to tax international companies is through international agreements, but the time for talking is coming to an end and the stalling has to stop.

“If we cannot reach agreement the UK will go it alone with a digital services tax of its own.”

Delivering his conference speech, Mr Hammond suggested the measure would form part of a programme to “regenerate capitalism” to tackle the challenges of the modern world.

It could also help to renew the appeal of the free market to a new generation which, he acknowledged, felt left behind by capitalism.

The Tories had to persuade these people that the market system could work for them, or see them fall for the “seductive simplicities” offered by Jeremy Corbyn's Labour, he said.

George Osborne first promised a tax to target global technology companies, designed to impose a 25 per cent levy on profits that are artificially diverted overseas.

However, it emerged in 2016 that the diverted profit tax – or “Google tax”, as it was dubbed – did not apply to the internet giant itself.

It was expected to prevent the US company registering up to $6bn of annual British sales in Ireland, so avoiding tax in the UK.

However, Revenue & Customs failed to recover a penny from Google through the DPT during tax settlement negotiations, The Times reported.

Instead, officials were understood to have concluded that the company’s offshore arrangements were legitimate.

Mr Hammond told the conference: “Just as, in late 19th century America, concerns about the near-monopoly of Standard Oil and the railroad cartels led to the introduction of the world’s first anti-monopolies legislation, so today, the expansion of the global tech giants and digital platforms, while of course bringing huge benefits to consumers, raises new questions about whether too much power is being concentrated in too few global technology businesses.

“That is why I have asked President Obama’s former chief economist, Jason Furman, to lead an expert panel to review the UK’s competition regime, to ensure it is fit for the digital era.

“And it isn’t just competition policy that needs updating. We can tell them how we have led the debate on reforming the international tax system for the digital economy, insisting that the global internet giants must contribute fairly to funding our public services.”

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