The UK Treasury is reportedly planning to abandon the digital services tax which was introduced this year in order to further trade negotiations for a post-Brexit free trade agreement with the United States.
The UK’s digital tax applies to businesses making search engines, social media platforms or online marketplaces available to UK users, including any associated online advertising of that business, which have a global annual turnover over £500 million pounds and over £25 million pounds of turnover attributable to revenue derived from UK users. The tax will apply at a rate of 2% to revenue over £25 million pounds.
In late 2019, US President Trump’s administration reportedly advised the UK government at multiple levels that no free trade deal will be agreed should the tax be passed into law. However, the UK government has reportedly denied the tax would be abandoned in order to secure a trade deal, and instead pointed to international digital tax negotiations as the reason the tax may be abandoned, with a spokesperson from the Treasury stating “We’ve been clear it’s a temporary tax that will be removed once an appropriate global solution is in place – and we continue to work with our international partners to reach that goal.”
Ref. CFE’s Tax Top 5 – 24 August 2020