Facebook, Google, Amazon to be affected by new UK digital service tax

The UK government has confirmed it will introduce a digital service tax on the UK revenues of online companies such as Amazon, Facebook and Google.

The 2 percent levy will apply to large multinational enterprises - regardless of where they are based - that provide a social media service, search engine or an online marketplace to UK users and will take effect on 1 April.

These businesses will be liable to pay the tax if their global revenues from digital activities exceed 500 million pounds, and when more than 25 million pounds of the revenues are derived from UK users. If so, its revenues derived from UK users will be taxed at a rate of 2 percent. However, there is an allowance of 25 million pounds, meaning a group’s first 25 million pounds of revenues derived from UK users will not be subject to the levy.

The government predicts the levy could raise 515 million pounds in additional annual income by the end of the 2025 financial year.

Amazon, Google and Facebook are among the companies that will be affected when the new levy takes effect. The online giants have long been criticised for paying low taxes compared to the huge revenues they generate in the UK.

Photo credit: Amazon, Facebook