In the News

UK Digital Services Tax starts to bring in revenue

Graham Watson

23rd November 2022

It is fascinating to see that the new UK Digital Services Tax - a 2% levy on the gross revenues of tech companies - has generated £360m in tax revenue from US tech giants in its first year. This was 30% more than forecast.

The reason this is eye-catching is because this represents more that most of them have been paying in corporation tax. It must give both the UK, and other, governments food for thought as regards the taxation of these firms.

In the past, US Big Tech giants paid little UK corporation tax by funnelling earnings through low-tax jurisdictions such as Luxembourg & Ireland. This is known as profit shifting.

Background on the UK Digital Services Tax

DST is designed to tax business groups that derive large revenues from UK users of search engines, social media platforms and online marketplaces. It taxes the revenues (rather than profits) derived from these activities at a rate of 2%.

Groups are liable to pay DST if their worldwide revenues from in-scope activities are more than £500 million and more than £25 million are derived from UK users. A group’s first £25 million of UK revenues are exempt from DST.

(Source: National Audit Office Report, November 2022)

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to tutor2u, reads voraciously and is interested in all aspects of Teaching and Learning.

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