Budget 2018: UK goes it alone on digital sales tax for tech giants UK chancellor Philip Hammond has used today’s budget to take aim at tech giants who he says aren't paying their fair share of tax in the nation and is promising to introduce a digital sales levy in 2020 to rectify this. The 2018 budget, delivered on a Monday for the first time since 1962, claimed that austerity is “coming to …
You don't think the companys will trim their profit margin, do you?
Everybody is paying VAT on purchases, so it's not as if the purchasers are buying stuff tax free.
The UK won't get this tax to fly until the OECD creates a level playing field. Now that the USA has reduced its headline corporation tax, there's a chance for this to happen.
Shareholders will be the ones paying any new tax, significant numbers of which are pension funds.
There is no money tree. Ultimately, it's us who pay for all government spending.
That's not how money works at all. There is a money tree its called fiat money which is created as debt (98% of all new money is created as loans). There is no gold standard, no fixed amount of money and no way of paying the debt back under the present system. Government spending is not determined by tax revenue and has not been for many, many years. The prime example is the US - where huge debt can be run up with zero prospect of it being paid back - but the dollar is still required for paying for oil which stops the value of the dollar falling too far. In fact if you believe governments should not 'borrow money' and individuals should not spend more than they earn, then welcome to the collapse of the financial system. No more debt spending means no more new money into the economy and the debts cannot be repaid or even the interest on the debt. Its an insane system that is one day bound to collapse, but that's what we've got.
@Brewster...
Not sure why you got a downvote as that is exactly the way it works. The marketing department of a company gets its yearly budget and spends it. If the advertising costs go up they change the marketing channel or buy less advertising.
Most of Google adwords is based upon auction style bidding anyway so costs are based around what everyone else wants to pay rather than set by Google directly.
"Do manufacturers really pass on increased advertising costs like they were a prise rise in a component or do they set a fixed budget (based on the market situation and available cash) and then spend it as best they can?"
It's complicated.
They will spend eg £100 on advertising if the profits they make from additional sales resulting from the adverts are more than £100. The way that advertising slots are sold at real-time bidding auctions means that the after-tax price would go down. That may reduce supply of advertising slots, and push the price back up a bit, by pushing the most marginal advertisers out of the market.
"They will spend eg £100 on advertising if the profits they make from additional sales resulting from the adverts are more than £100"
ROFL ... if only.
The marketing department will get a fixed budget with potential additional for special projects which they will spend and try to evaluate the coverage and reach by a number of methods that rarely hold up to scrutiny. They will then say they don't have enough insight, or add words like brand awareness or talk about the long tail - all very intangible, but enough to confuse the CEO to maintain their budget or increase it the next year.
True example I have seen first hand (has been distorted for confidentiality).
Company spends £a on a marketing idea in their non-usual channel at an audience in a country that they don't usually target. The return is £a x 10. "wow, we must do more of this", "lets put more money into this next year", "the marketing department are amazing". Then some lowly ranked person asks the question what was the spend from that country the past three years without targeting them and without the new channel. Just happens to have been even more revenue previously, just hadn't been directly noticed!
Indirectly, yes. We buy something, a portion of that something's cost is advertising. Advertising costs go up, so do the prices of $THINGs.
The cost of advertising your product on the Internet goes up - do you pass that onto the consumer? I don't think so - unlike manufacturing and distribution costs, which have to be absorbed somewhere, advertising is something that you choose to spend based on a balancing act of depressing sales because your product is more expensive and increasing sales because more people think buying it makes them look smarter or sexier or whatever.
I suspect as advertising costs go up, you look for cost savings in the advertising - for example doing less of it, perhaps more efficient targetting.
I'm not paying for google search directly, but I'm ABSOLUTELY sure they'll find a way to recover that cost, and it'll be recover PLUS, as usual. Not that I think they should get away with what they have until now, those fuckers, it's just that they're like slime, you squeeze here, it starts poking out through other gaps...
>..and the corporations will pass the cost of that tax straight on to us as higher prices. Thanks Phil.
No they won't. British Widgets Ltd will run the job on a cheaper foreign Amazon AWS zone (no GDPR for us now we are free of the ECJ jackboot), Amazon will book the AWS revenue abroad.
Or are we going to demand that British companies only use British suppliers for their internet stuff ?
"No they won't. British Widgets Ltd will run the job on a cheaper foreign Amazon AWS zone (no GDPR for us now we are free of the ECJ jackboot), Amazon will book the AWS revenue abroad."
Well, given the wording of the article, if they book that revenue abroad and don't declare it to the Exchequer, that would be tax fraud. If they do declare it, the 2% (for example) counts as that. And since British Widgets Ltd will declare it in their accounts, it would be a dangerous game to play.
> if they book that revenue abroad and don't declare it to the Exchequer, that would be tax fraud
Why if they are a foreign company?
I buy email services from a US company, they book that income in the USA (or probably in Grand Cayman) I have that in my accounts as a payment to the US company. Where does the Inland Revenue get any of this ? Is the UK planing to tax any foreign company on sales from UK customers?
All Amazon have to do is close its AWS business in the UK, and have UK customers use USA hosted AWS zones and pay in $. It can still keep its UK shopping site - that makes no profit.
It can still keep its UK shopping site - that makes no profit.
Only thanks to slick financial engineering. So it transacts between a UK customer and a UK supplier, or supplies out of it's UK warehouse. Practically, that should be a UK sale. Or it becomes an Irish sale with costs lumped on from other bits of Amazon to make that sale (or commission) unprofitable. So the budget proposal is a 'simple' sales tax to try and stop that kind of pish take. Which may or may not work depending on lawyers and accountants. Same kind of deal applies with Google, ie they've sold $X in advertising to UK eyeballs, give HMG 2% TYVM.
Except, with tech being basically free to cookie-cut your way into as much replication as you can be bothered, they will sell, for example, $X worth of "advertising" to Wakanda, and give you the rest of the world for free. That way, the allocated UK "expense" was free, and therefore untaxable. Good luck HMRC getting a piece of the pie from Wakanda, or any other tax haven you care to mention...
"..and the corporations will pass the cost of that tax straight on to us as higher prices. Thanks Phil."
Ignoring the fact (already pointed out) that we don't pay for services from most of the targeted corporations, it will also hopefully start towards leveling the playing field with online mega-retailers and small businesses.
I’m puzzled why people think we shouldn’t tax the digital multi nationals more as it may increase consumer purchase costs. By that logic if we removed all corporation tax then we’d all be happy as everything would be cheap - when the reality is that shareholders would be taking home larger dividends and we’d have to incur higher income tax or VAT to make up the shortfall.
..and the corporations will pass the cost of that tax straight on to us as higher prices.
Sorry, but there will be no cost to the corporations, not many anyway. Or better put, not the intended targets.
Some facts:
1. DST is only intended to run until OECD/G20 tax comes in.
2. DST is in consultation with a 2020 implementation date.
3. OECD is in consultation also with a 2020 implementation date.
4. DST has a "safe harbour" exemption for those of a loss making persuasion.
5. There is no requirement to have a legal entity registered in the UK in order to have a web site accessible from the UK.
6. DST is intended to raise £400M
7. We have no means of determining how much Google makes from UK search Vs its Android division or any of the other letters in the Alphabet Soup.
Thus, we can determine the following opinions:
DST will cost the Treasury a lot of money (fact 1) and in all likelihood raise nothing because we'll implement OECD by the time DST is ready (facts 2 & 3).
Amazon won't pay a penny in DST because it makes a loss (facts 4 & 7). Google can probably restructure to achieve the same thing (facts 5 & 7). Apple might take a hit, but barely; we can't actually force companies to register for some type of self assesment by which we could calculate their DST if they don't require a physical presence here.
They're avoiding what is frankly a trivial tax split between even just the 4 main players (fact 6).
It makes for a good announcement but will in all likelihood either only raise revenue from unintended targets (How many web sites have a search feature that isn't google? Digital publishing step right up), or would in any case raise less than MPs spend on their pensions.
Shouldn't they wait until it has actually been in effect a couple years to see whether it is the win its backers claimed, or the disaster those who voted against it said it will be?
I mean, I'm pretty sure the US never considered a coin commemorating the Vietnam war...
I don't think we had a 50p coin back then, or a 10 shilling coin for that matter.
1d was equivalent in value to about £1 now, and we had 1d, 1/2d and 1/4d coins.
According to Blackadder, in 1066 the egg had yet to supercede the worm as Britains lowest form of currency.
>Shouldn't they wait until it has actually been in effect a couple years to see whether it is the win its backers claimed, or the disaster those who voted against it said it will be?
I strongly believe that all government policies should have associated, strictly defined and independently measured KPIs. Any policy that doesn't meet 95% compliance after a pre-defined period of time automatically gets reversed and the Minister responsible loses their job.
@ Pascal Monett
"Haven't they all left already ?"
Doubt it. For all the EU lovers they seem to still be here screeching. Except the doctors who decided that brexit means they must go to that other EU member New Zealand (if I remember that right).
I am wondering if the 50p will be an attempt to remind some people what the result was.
@codejunky
Doubt it. For all the EU lovers they seem to still be here screeching.
And yet ironically a glut of ministers and personalities responsible for the vote leave campaign are either buying of have bought residences abroad recently. Funny that.
@ Rameses Niblick the Third Kerplunk Kerplunk Whoops Where's My Thribble?
"And yet ironically a glut of ministers and personalities responsible for the vote leave campaign are either buying of have bought residences abroad recently. Funny that."
So not racists and xenophobes but instead outward looking. Good.
@codejunky
So not racists and xenophobes but instead outward looking. Good.
Absolutely, and I have never labelled any of them as such. Rat-bastards leaving a sinking ship after they personally gnawed a hole right through the hull for their own personal amusement, yes absolutely, but not xenophobic.
@ Rameses Niblick the Third Kerplunk Kerplunk Whoops Where's My Thribble?
"Absolutely, and I have never labelled any of them as such."
I said it for the benefit of the remainers who like to make such claims.
"Rat-bastards leaving a sinking ship"
That is one way to describe leaving the EU but then the rat cannot save the sinking ship and making an exit is a good idea. As for them buying foreign property, so what? We have a world of people investing in property here. Not a bad thing.
@ Paul Shirley
"Why? Have you forgotten the UK voted to split England&Wales from NI&Scotland so soon?"
What on earth are you talking about? Scotland had a vote and decided to remain (with support for leaving falling hard). Attempts to resuscitate such desires fell hard when the facts became obvious that if Scotland leaves the UK in hope of joining the EU they will be nothing but alone and disappointed (they dont meet the criteria).
As for NI they are still part of the UK. That is why the EU is trying to annex it.
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