Budget 2018: Who will pay the Digital Services Tax?

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It was one of the more surprising features of the Budget, a Digital Services Tax designed to make tech giants earning vast revenues in the UK pay their fair share.

Now comes the difficult part – working out how the tax will be designed and who will pay it.

The tax looks as though it is targeted at the likes of Google, Amazon and Facebook – the Treasury says it will apply to search engines, online marketplaces and social media firms.

“You can’t specify the named firms so you think what characteristics catch them but not start-ups,” says Jill Rutter, a former Treasury civil servant who now works for the Institute of Government.

She says the chancellor will have had two worries in designing the tax – “catching things he doesn’t want to catch – or not catching what he does want to catch.”

But tax lawyer Dan Neidle from Clifford Chance says there is a guiding principle behind the tax. “The highfalutin theory is that value is being created by users for these companies and not being taxed. So for instance, you put a picture of a cat on Facebook, people click on an advert next to it and Facebook earns money from that.”

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