Recommendation 14

The Chartered Institute of Taxation describes the Digital Services Tax as a ‘blunt instrument’.43 There are aspects of the tax’s design that are tolerable in the short-term but would need to be addressed if its life was to be extended appreciably: • The Digital Services Tax is a tax on revenues. If the activities are profitable, the business may also pay corporation tax or corporate income tax on those activities in the country where those profits are taxed.44 HMRC does have provision for businesses to be exempted from payment if they can demonstrate that the activities in question are not profitable (called the alternative basis of charge).45 • The Expedia Group, one of the payers of the tax, pointed out to us in written evidence that for high-volume low-margin businesses such as themselves and other travel firms, a 2% tax on revenues effectively wipes out any profit.46