Recommendation 5

There is a significant risk that the Digital Services Tax may require extension beyond its intended lifespan, and that this could prompt changes in taxpayer behaviour. Should the OECD reforms be delayed beyond 2024, the Government is required by law to review the operation of the Digital Services Tax in 2025. We assume that the tax would continue in some form if possible but there is a question about its long-term sustainability. While there may be no evidence of active tax avoidance or evasion by businesses to date, this may change if the life of the Digital Services Tax is extended. Businesses such as those within the scope of the tax traditionally employ significant resources to ensure that their exposure to tax is minimised, and they may consider that the Digital Services Tax is more worthy of such attention if it is extended. Methods for ensuring compliance are untested and could require cooperation between countries. The Digital Services Tax 7 Recommendation 5: Ahead of the formal requirement to review the tax in 2025, HMRC should develop a contingency plan for what happens if the Digital Services Tax needs to be extended, including a robust process for addressing non- cooperation with its compliance regime. 8 The Digital Services Tax 1 Design and implementation of the Digital Services Tax