The digital services tax imposed by the UK government collected $430 million (£360 million) from US tech companies including Apple, Google, and Amazon in its first year according to the country’s National Audit Office (NAO).
In 2020, the UK introduced the digital service tax (DAT) which charges a 2% share of the gross revenue of tech companies that operate search engines, online marketplaces, and social media services. It targets large companies with “worldwide digital revenues over £500m and with revenues derived from UK users over £25m.
DAT is part of the UK government’s effort to tax tech giants which did not have offices in the county but were based on revenue generated instead of declared profits like Apple and Google.
The Guardian explains:
The tax is levied on gross revenues from digital advertising sales, and e-commerce sales companies including Amazon, Apple and eBay make from third party sellers on their sites, but does not capture direct online sales to consumers from retailers such as John Lewis and Tesco.
Tech giants such as Amazon, Google and Meta-owned Facebook have historically paid relatively little corporation tax in the UK because they typically ensure their British operations make very little profit, instead funnelling earnings through low-tax jurisdictions such as Luxembourg and Ireland.
Apple is among the five tech companies that paid 90% of DST in 2021-22
NAO announced that DAT crossed its 2020-2021 annual target of £275m because of the increase in huge online sales during the COVID-19 pandemic and 90% of DST collections came from “five large business groups”. The tax is expected to collect over £3bn by 2024-25.
The government has not named any businesses that are liable for DST, however businesses including Amazon, Google, Apple and eBay have publicly acknowledged liability for DST.
As per the report, the tech giant passed the tax burden to third-party businesses.
Amazon, Google and Apple say they have passed the 2% tax on to the bills of the third-party businesses and sellers that use their sites.
Furthermore, HMRC has raised concerns regarding other companies that need to pay the tax.
“Around 90% of DST collected in 2021-22 comes from just five large business groups,” said Meg Hillier, chair of the committee of public accounts. “HMRC needs to test whether all businesses – not just the low-hanging fruit – are paying their fair share.”
Although DAT accumulated more revenue than the UK corporation tax, it will not around for long. From 2024 it will be replaced with a new global tax system which means Apple and other tech giants will liable to pay more.
From 2024, it will be replaced by a new global tax system after the OECD brokered a deal between 136 countries, including the UK, that will result in large multinational companies paying tax in the countries where they do business, and committing themselves to a minimum 15% corporation tax rate.
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