Budget 2017: technological giants aimed at VAT payments



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Reuters

The government will take measures to prevent VAT evasion by multinationals that protect their income abroad and also by sellers on online websites.

As of April 2019, companies such as Google, Amazon and Apple will have to pay taxes on royalties related to sales made in the United Kingdom.

The measure is expected to generate 200 million pounds a year on average.

HMRC may also retain online markets responsible for any unpaid VAT for all merchants on its platforms.

All companies that operate on their sites must show a valid VAT number.

& # 39; Unfair advantage & # 39;

The increase in tax revenues of multinationals should increase £ 285m in 2019-20, but that amount is expected to fall in each subsequent year to £ 130m in 2022-23.

The Budget statement said that the payments would be payable "even if the group does not have a taxable presence in the United Kingdom under current rules".

He added: "It will prevent multinationals gain an unfair advantage by placing an IP [address] in low or non-existent tax jurisdictions and thus level the playing field."

The move is expected to have increased £ 800m in March 2023.

Analysis: Rob Young, BBC Business Presenter

The technology giants and the tax collector are playing a digital game of cat and mouse.

As the Paradise Papers showed recently, large international companies use various means to move money out of the reach of the Treasury. Money obtained from an online sale made in the United Kingdom can not be taxed in the UK or anywhere else.

The intellectual property of digital companies is often owned by companies in tax havens, so royalty payments are channeled abroad.

The chancellor tries to tax this flow of money, recognizing that "digitalization poses challenges for the sustainability and equity of our tax system".

The Treasury is not clear about how its new digital tax will be applied: it admits that some companies do not have a "taxable presence in the United Kingdom".

The forecast of annual fall in tax revenues may suggest that the Treasury expects companies to find a way to avoid the rule.

This is not the complete answer, but it is a highly symbolic announcement: the ministers have had enough. Foreign Minister Philip Hammond said: "Multinational digital companies pay billions of pounds in royalties to jurisdictions where they are not subject to taxes and some of them are related to sales in the United Kingdom.

"This does not solve the problem, but sends a signal of our determination and we will continue working internationally to find a sustainable and just long-term solution"

The plan to ensure the safety of individuals and businesses that sell through online markets pay the correct tax after warnings issued to Amazon and eBay last month about benefitting sellers that they were not charging VAT.

A report from the MPs estimated that up to £ 1.5bn tax has been lost on these third-party vendors.

Digital platforms will be asked to play a "broader role in ensuring that users comply with fiscal rules."

The government is willing to ask for more evidence next spring to explore the action that digital platforms can take.

Alison Lobb, Deloitte's international tax partner, said: "It will be necessary to be able to clearly distinguish the digital companies" subject to the tax on the digital turnover of other businesses.

"Even more It will be difficult to determine the appropriate rate, left open in the position document, so that it represents a reasonable proxy for the tax on profits, and so that it does not impede cross-border trade.

"Any movements made by the United Kingdom will likely be reflected in other countries, so UK digital companies operating abroad will be equally affected".

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