Internet giants may be taxed on revenues, not profits

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In an interesting BBC interview, Financial Secretary Mel Stride has suggested that large tech companies and other businesses who shift their profits overseas through complex corporate structures could be taxed on revenues based on their UK activities rather than their declared UK profits via corporation tax.

“Where they are generating billions of pounds worth of value in the United Kingdom and they may be paying very little tax we believe they should be paying more”
– Mel Stride, Financial Secretary

The issue of revenue based taxation was specifically raised in a discussion document and consultation that has just finished last month, the issue of revenue based taxation was proposed as the potentially preferred route. However, Mel Stride pointed out that revenue based taxation is a blunt instrument and care would have to be taken that it didn’t negatively impact start ups which may be loss making for a period of time.

Starbucks, Facebook Amazon and Google are all in the firing line. eBay is notably absent from reports for two reasons – firstly they’re not actually a retailer and secondly they have already moved to billing all their UK sellers from a UK entity and so pay tax based on profits accrued from their UK revenues in the UK. Some other tech giants still bill sales from overseas and use their UK arms as marketing or for product development.

Being taxed on revenues is an interesting move as it’s more akin to personal taxation than running a business. Businesses naturally want to invest in order to grow and revenue taxation, even on well established businesses could restrict future investment in infrastructure… until a whole raft of new loopholes and tax allowances were inevitably introduced to foster growth.

It is important to realise that just about everyone has given up accusing Internet giants of not paying taxes as they fall due. Even our Government and the Treasury have now accepted that the companies pay all taxes due. What is being considered is a change to UK and International taxation to close loopholes and ensure revenues raised in the UK are taxed fairly in the UK and businesses make a reasonable tax contribution in the countries they operate in.

One Response

  1. Another way for the public to pay more tax.

    Still its one way to drive jobs and investment overseas.
    How long before such a tax used on the big boys gets used on the smaller ones? Taxes on income used to be paid only by the rich, then someone got the bright idea of applying it to the not rich and its brought in a lot more money. Income tax anyone?

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