30 Oct Chancellor’s tech tax sends wrong message to investors
The Chancellor made much of his budget signalling the ‘end of austerity’ but the proposed Digital Services Tax was a mistake which a country stepping out into the post-Brexit world should not be making.
The Tech Tax means that online tech giants including Google and Facebook are to be hit with a new levy worth up to £400m per year as Mr Hammond tries to shift purchasing patterns of Britain’s consumers through fiscal measures.
But this latest proposal, which he called a “narrowly targeted” tax only to be paid by large companies that are profitable, is an error.
The UK tech industry is performing well, and that boom doesn’t just benefit those working in the industry: it benefits the whole country from secondary suppliers to public services funded by taxes generated by corporation tax and income tax.
At a time when the UK is negotiating its way out of a stilted political bloc which produced mountains of regulation making innovation much trickier, the UK should be championing itself as a bastion of business, of global trade and of innovation – and that means we need the business environment – and the reputation that goes with it – which attracts start ups and investment.
A unilateral UK tax is a showboat tax, aimed at pandering to the public galleries. Instead of that pro business message we should be sending out across the world, it says ‘we can’t make the current model work properly because it is outdated, so we have instead developed this massive sledgehammer to crack every successful tech firm’s nuts.’
This tax also cannot distinguish between firms that already pay plenty of tax and those that do not. It also appears to be some kind of additional corporation tax for technology companies because it is based on turnover: why not just let corporation tax do its job instead of specifically targeting a highly successful industry?
As with so many costs, it is the consumer who will inevitably pick up the bill for this either through higher prices or lower levels of investment and competition as new entrants are deterred from entering the market.
Is this really the best that our leaders can do? It’s as crude as oil from a well.