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Google calls for “international resolution” to tech tax issue

Google has called for an “international resolution” to the issue of the taxation of tech companies in light of the UK government’s proposals for a Digital Services Tax.

The Chancellor announced during Monday’s Budget that from April 2020 social media companies, search engines and online marketplaces with turnovers of at least £500m will be taxed at a rate equivalent to two per cent of their UK revenue.

But speaking before the House of Lords communications committee today, Katie O’Donovan, Google’s UK public manager, attempted to discourage governments from taking unilateral action on the issue.

“Our global tax rate over the last decade has been 26 per cent, which is comparable to what UK corporation tax is, but the proportion we pay in the US, which is our home country, is 80 per cent,” she told the committee.

“So that is one of the reasons that we think it is important to have an international resolution to this problem, so that it is not an issue that is solved in one country and then has knock-on consequences in other countries.”

The UK government has been leading attempts at the OECD and G20 to establish a new global tax system for the digital age, but the Chancellor, Philip Hammond, said progress to date had been “painfully slow”.

“We will continue to work at the OECD and the G20 to seek a globally agreed solution and if one emerges, we will consider adopting it in place of the Digital Services Tax,” he said during the Budget. “But his step shows we are serious about this reform because it is only right that these global giants with profitable businesses in the UK pay their fare share towards supporting our public services.”

Russ Shaw, the founder of Tech London Advocates, described the move as “the wrong approach”. “As much as a digital tax is a prudent step – especially in a time when new frameworks are required to a fit a digital economy – exposing the UK in a such a way would be detrimental to our economy and international stance,” he said.

But the Labour MP Darren Jones praised the move. In comments shared with NS Tech, the former tech lawyer said that while “the devil will be in the detail, […] I do applaud the Government for trying to get on with this issue of taxing global tech companies properly whilst still trying to secure global agreements with other countries.”