The United Kingdom Warehousing Association (UKWA) has warned the new ‘tech tax’ announced by Chancellor Philip Hammond in Monday’s Budget could be first step towards the introduction of new taxes on all internet sales, threatening a logistics industry where many companies already operate on extremely thin margins.
From April 2020, large social media platforms, search engines and online marketplaces will pay a 2% tax on the revenues they earn which are linked to UK users. The Chancellor said the new Digital Services Tax will only be paid by companies which are profitable and which generate at least £500m a year in global revenues. The new tax is expected to raise more than £400m a year in revenues.
In his Budget statement, Hammond said: “This will be a narrowly-targeted tax on the UK-generated revenues of specific digital platform business models.
“It will be carefully designed to ensure it is established tech giants – rather than our tech start-ups - that shoulder the burden of this new tax.
“It is important that I emphasise that this is not an online-sales tax on goods ordered over the internet… such a tax would fall on consumers of those goods – and that is not our intention.”
UKWA CEO Peter Ward commented: “Companies such as Amazon have been widely criticised for the small amount of tax they pay in the UK and, at this stage, the Chancellor is only targeting ‘established tech giants’ rather than start-ups with his new ‘tech tax’.”
“But UKWA has been aware of rumblings from Westminster for some time that the changing face of retailing and, in particular, the ongoing decline of the high street, is likely to prompt the Government to introduce new taxes on internet sales.
“UKWA accepts that there is clearly a need for some legacy tax regimes to be re-aligned to societal changes in the digital age, however, as the lines between retail, online fulfilment and logistics become increasingly blurred, we must ensure that the logistics industry – where many companies already operate on extremely thin margins – is not hit with a tax it cannot afford in the future.
“The Association is monitoring the situation closely and will, of course, argue robustly against the imposition of any new taxes that adversely impact on the companies that operate within the logistics services sector.”
The Government said it will consult on the detail of the new tax to “make sure they get it right”.
Hammond said the Government will also continue to work at the OECD and G20 to seek a globally agreed solution and “if one emerges, we will consider adopting it in place of the UK Digital Services Tax.”
Posted on: October 31st 2018