The UK will work with the rest of the world in tackling the way global tech companies are taxed, it has been announced.
The news comes after the British Chancellor, Philip Hammond, spoke to the world’s top economies at this year’s annual G20 conference, based in Japan.
Speaking to G20 finance ministers and central bank governors, the Chancellor said the “digital revolution has transformed how we do business, but the “international corporate tax system is outdated”.
He further warned that “a plan needs to be agreed to tackle the way tech multi-nationals are taxed” because change is “too slow”.
It comes after the UK was the first major economy to introduce a Digital Services Tax on the revenues of certain online business models.
In his most recent Spring Statement, Mr Hammond said he would look at implementing a new two per cent digital tax aimed at global organisations with a turnover in excess of £500 million. Mr Hammond said the tax – expected to come into effect from April 2020 – would generate £440 million in three years.
The tax – which has yet to be agreed upon by other countries – would see the largest technology firms taxed based on where they generate revenue, rather than where they are headquartered.
Under current legislation, digital giants – such as Amazon, Google and Apple – are able to reroute their profits through low-tax jurisdictions, meaning very little tax is generated in the countries where they actually market their products and services.
Speaking at the G20 summit this year, Mr Hammond added that an international agreement would be the “best solution” to ensure that “digital platform businesses that generate substantial value in the UK pay their fair share of tax”.