UK Digital Services Tax
On Budget day, 29 October 2018, Chancellor Phillip Hammond announced the arrival of a new UK tax: the digital services tax ('DST'). Fast forward two years and UK DST is law, effective 1 April 2020 and included in Finance Act 2020.
DST is a radical divergence from several well-established international tax principles. It is a tax on gross revenues (rather than profits). It exists outside the remit of the arm's length principle and the UK's treaty network. DST could apply where, under traditional methods, no profits should be allocated to the UK or where businesses have no UK taxable presence for corporation tax purposes.
In this Digest we will start by considering the history of the digital tax debate and the drivers for this new UK tax. We will then explore the workings of the tax in detail before moving on to consider the shelf life and future prospect for the tax, considering multinational developments.
In this Tax Digest
- Discussion of the historic drivers for a 'digital tax'
- An understanding of the previous attempts at proposed multinational solutions to the challenges of the digital economy
- A thorough outline of the UK digital services tax legislation, including a full walk through of the legislation, with complementary commentary, guidance and examples
- Critical analysis of the practical problems faced by targeted gross revenue taxes
- A summary of the OECD proposed Pillar One and Pillar Two approach for a long-term multinational solution to the challenges of the digital economy