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U.K. to Slap New Tax on Technology Giants

With the tax-minimization efforts of global technology firms in the spotlight, the British government unveiled a new plan Monday to ensure that Silicon Valley’s finest pay their dues.

The likes of Amazon, Google, and Facebook will be taxed on revenues generated in the U.K. under a new digital services levy that British Chancellor of the Exchequer Philip Hammond unveiled in his proposed government budget Monday.

Beginning in 2020, the tax would be assessed on “digital services companies” that register minimum annual revenues of £500 million ($640 million) globally. The government said the tax had been designed so that established tech giants shouldered the burden rather than start-ups.

A 2% tax would be applied. It is expected to raise about £400 million ($512 million) a year, Hammond estimated. He said digital platforms “have changed our lives, our society and our economy, mostly for the better,” but that taxation rules “have not kept pace.”

Specifically, the tax will apply to revenues generated from search engines, social media platforms and digital marketplaces.

The new system taxes revenues instead of profits, which companies often record outside the U.K. The tech companies are clear they comply with the letter of the law.

The move to amend the tax rules comes amid a wider international effort by the Organization for Economic Cooperation and Development to overhaul the rules. New OECD regulations could ultimately take precedence over U.K. rules, but Hammond said progress internationally had been “painfully slow.”

The digital services tax takes effect in April 2020.

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