The aim of the UK’s DST is to ensure that digital businesses pay tax reflecting the value they derive from the participation of UK users.
Glyn Fullelove, Chair of CIOT’s Technical Committee, said:
“Given the nature of the tax a pragmatic approach will be required in order for it to be implemented effectively. This is because revenue taxes such as this are a blunt instrument that cannot accurately represent the tax on the profits related to user based value on all businesses on which it is imposed. It will inevitably over-tax some companies and under-tax others.
“Many companies will not have the necessary information to arrive at a precise answer to how much DST they should pay. In practice the Government will have to rely on companies to arrive at a ‘best estimate’ of the amount of the DST payable based on a just and reasonable estimate of the UK revenues liable to the DST. Given the economic distortions that may arise and the somewhat arbitrary impact of this blunt solution, we would prefer that the measure is expressly time limited to a period of, say, five years.”
The CIOT strongly supports the UK government’s aim of a long term reform of the international tax system. The CIOT encourages a re-doubling of efforts to achieve an early consensus on the way forward because we are increasingly facing an international tax landscape of unilateral actions being taking independently by countries.
Glyn Fullelove said:
“Unilateral measures inevitably lead to less alignment of tax bases globally, resulting in double taxation and a significant compliance burden for businesses and, consequently, stifle economic growth and innovation. Multilateral action across the globe is ultimately essential if the aim is to ensure, so far as possible, no double taxation and we hope unilateral measures can be repealed once a global long term solution is agreed.
“In practical terms the DST will be based on estimates provided by the digital business themselves1 and a tax operating in this way could lead to taxpayers with very similar businesses paying different amounts of DST. In our view this result is only acceptable in a temporary tax.”