The UK’s digital services tax brought in £567m for the Exchequer in 2023, according to freedom of information data obtained by law firm DLA Piper – a significant increase over the £380m collected in 2022 and ahead of the UK government’s original forecast of £465m.
The digital services tax applies a 2% charge to UK-generated digital services revenues (rather than profits) of companies with global digital services revenue exceeding £500m with more than £25m derived from the UK. Together with other countries including the US, France, Spain and Italy, the UK has already committed to move away from unilateral digital services taxes as part of the transition to an international solution. The UK will, however, retain revenue collected from the digital services tax until the Pillar One reforms become operational.
The US views the application of digital services taxes as particularly discriminatory towards US-based companies which operate internationally, and had proposed retaliatory measures. Agreement was however reached to pause any such measures until the end of an ‘interim period’ during which an interim credit would accrue to companies, equal to the amount of DST incurred in the interim period which is in excess of the tax that would have been incurred under Pillar One, had Pillar One been implemented in that period. Broadly, the interim credit can be set off against future Pillar One liability.
The interim period originally ran to 31 December 2023 but was extended to 30 June 2024 – with the intention that Pillar One would be implemented from 1 July. Although the June deadline has passed without final agreement on Pillar One, in a statement provided to Law360, Manal Corwin (Director of the OECD Centre for Tax Policy and Administration), said: ‘Countries are still at the table, precisely because we are making progress ... As each of these milestones arrives, whether we successfully conclude by a given date or not, we get closer to the finish line.’
Matt Davies, Tax partner at DLA Piper said: ‘The success that HMRC has had in collecting digital services tax will send out a clear signal to governments around the world that this is a viable and potentially lucrative revenue generator. As a result it is important that the OECD reaches an agreement on Pillar One to avoid the continued proliferation of differing DSTs across the globe, which present tech companies with an administrative nightmare.’
The UK’s digital services tax brought in £567m for the Exchequer in 2023, according to freedom of information data obtained by law firm DLA Piper – a significant increase over the £380m collected in 2022 and ahead of the UK government’s original forecast of £465m.
The digital services tax applies a 2% charge to UK-generated digital services revenues (rather than profits) of companies with global digital services revenue exceeding £500m with more than £25m derived from the UK. Together with other countries including the US, France, Spain and Italy, the UK has already committed to move away from unilateral digital services taxes as part of the transition to an international solution. The UK will, however, retain revenue collected from the digital services tax until the Pillar One reforms become operational.
The US views the application of digital services taxes as particularly discriminatory towards US-based companies which operate internationally, and had proposed retaliatory measures. Agreement was however reached to pause any such measures until the end of an ‘interim period’ during which an interim credit would accrue to companies, equal to the amount of DST incurred in the interim period which is in excess of the tax that would have been incurred under Pillar One, had Pillar One been implemented in that period. Broadly, the interim credit can be set off against future Pillar One liability.
The interim period originally ran to 31 December 2023 but was extended to 30 June 2024 – with the intention that Pillar One would be implemented from 1 July. Although the June deadline has passed without final agreement on Pillar One, in a statement provided to Law360, Manal Corwin (Director of the OECD Centre for Tax Policy and Administration), said: ‘Countries are still at the table, precisely because we are making progress ... As each of these milestones arrives, whether we successfully conclude by a given date or not, we get closer to the finish line.’
Matt Davies, Tax partner at DLA Piper said: ‘The success that HMRC has had in collecting digital services tax will send out a clear signal to governments around the world that this is a viable and potentially lucrative revenue generator. As a result it is important that the OECD reaches an agreement on Pillar One to avoid the continued proliferation of differing DSTs across the globe, which present tech companies with an administrative nightmare.’
