Digital services tax: introduction

Part of Finance Bill – in a Public Bill Committee at 12:00 pm on 11th June 2020.

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Finally, I would like to touch on the future of a multilateral approach to taxing digital companies. The OECD’s public consultation last year outlined three proposals for the way forward on taxing multinational enterprises, including a user participation model similar to what has been proposed today. As Tax Journal reported in response to the consultation, the user participation model seemed to hold least appeal. It says that it was widely considered to be conceptually flawed because it was too narrowly targeted on certain revenue streams that may be impossible to ring-fence in practice. It also highlighted practical concerns about the difficulties of identifying users and allocating value to such users, which it says could render the tax unworkable.

Given that the international consensus seems to be geared against a user participation model in the long term, why is the UK implementing such a model? Given how complex the implementation of this tax will prove to be, it would arguably be wiser to create a model that closely reflects that which will eventually be implemented. The Minister will be aware of the direction of travel on this issue, and I would be grateful if he could update us on any progress towards a solution.

The Minister will also know that the OECD is expected to publish its final report, including a consensus-based long-term solution later this year. However, even in normal times such a solution has been difficult to come by. The coronavirus emergency means that Governments around the world and the OECD are focusing on their response to that crisis. How can we be sure that this will not be another casualty of the pandemic? This does not mean that the challenges of taxing the digital economy should fall by the wayside. In fact, they are more pressing than ever—both the domestic and global challenges—and a solution will be arrived at only if all countries exert the political will necessary. I urge the Minister and the Government to redouble their efforts in pursuit of this goal. Until that is the case, the Opposition will continue to push for a more ambitious approach and for greater fairness and transparency within our system as a whole so that businesses on the high street which every year without fail pay what is asked of them, and other taxpayers who simply pay what is deducted from their wages, can be confident that those big players with access to the best possible advice do not just shift around the profits that they derive.

We believe that a more ambitious approach is demanded by the unique and challenging circumstances that we are in, and we remain concerned that the measures today simply do not go far enough.