Forty-Fourth Report - The Digital Services Tax

There are obvious challenges facing the OECD in implementing the multilateral Pillar One reforms to the planned timetable, which could have major implications for the future of the Digital Services Tax. Some other countries, including France for example, have also … Read more There are obvious challenges facing the OECD in implementing the multilateral Pillar One reforms to the planned timetable, which could have major implications for the future of the Digital Services Tax. Some other countries, including France for example, have also introduced new taxes similar to the UK’s Digital Services Tax, though they have varying scopes and tax rates. The introduction of such taxes reflects a wider desire for change and is a useful way of keeping up the pressure to introduce the OECD reforms. The timetable for implementation of the OECD reforms has already slipped once since the OECD announced agreement on the framework for the two-Pillar solution in October 2021. The OECD’s current timetable is for a multilateral convention signed by 140 tax jurisdictions in mid-2023, leading to implementation of Pillar One in 2024. This looks challenging and the ability to get key players on board is crucial. HMRC has not yet produced an estimate of revenue to the UK from Pillar One, telling us that too much is still uncertain about the new 6 The Digital Services Tax arrangements. HMRC says that the Office of Budget Responsibility’s estimate for annual revenues of £2 billion through Pillar Two is in line with high-level estimates from OECD. Recommendation 3: HMRC should update Parliament, within three months of international agreement on implementation of Pillar One, on progress with the implementation of the reforms. Show less

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On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Treasury and HM Revenue & Customs (HMRC) on the Digital Services Tax.1 The government introduced the Digital Services Tax in April 2020 because it was concerned that the existing international tax system did …

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The Digital Services Tax is an interim solution to meet a perceived a lack of ‘fairness’ in the current system, and is not on its own intended to deliver a ‘fair’ system, or to level the playing field between online retailers and the high street, although the additional receipts are …

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HMRC did not take the view that the tax was significant enough to have a noticeable additional burden on businesses. However, evidence submitted to us by one travel business complained of the greater impact on those operating high-volume, low-margin businesses.18 HMRC also acknowledged that a business will be taxed twice …

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Since 2013, the Organisation for Economic Co-operation and Development (OECD) and the G20 group have worked together under the ‘Base Erosion and Profit Shifting’ project, and subsequently with around 140 countries and tax jurisdictions under the ‘Inclusive Framework on Base Erosion and Profit Shifting’, to reform international tax rules.21 These …

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The Digital Services Tax is intended to fill the gap until the implementation of Pillar One, albeit as a ‘second-best’ solution.23 Other countries have also introduced a Digital Services Tax, including France, Italy, Spain and Austria.24 HM Treasury told us that this reflected the widespread feeling among members of the …

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