The UK government is considering substantial changes to the way the Treasury taxes technology companies such as Google and Facebook. According to BBC News, officials have said that a shift to tax revenues, rather than profits, is the “potentially preferred option.”
The move would vastly increase the taxes on these companies, which currently pay taxes on profits, totaling much smaller sums than a tax on revenues.
While Google’s UK revenues added up to £1 billion in 2016, their pre-tax profits were only £149 million. It paid taxes on this smaller figure, which totaled £38 million. And that figure was still higher than taxes paid in prior years, since the company has since changed its own approach to accounting for its UK profits. Other large tech companies, such as Facebook, would also face similar increases in taxes owed.
In 2016, Facebook paid only £5.1 million on £842 million in revenues, and £58 million in profits before tax.
Speaking to BBC News, the Treasury’s Financial Secretary, Mel Stride, said that these companies should pay a “fair” level of taxes.
“At the moment [tech giants] are generating very significant value in the UK, typically through having a digital platform with lots of users interacting with that platform…That is driving a lot of value, so you’re looking at social media platforms, online marketplaces, internet search engines – where at the moment the tax regime is not taxing those activities fairly. We want to move to a situation where we are taxing those activities fairly.”
Stride noted that while taxing revenues was the favored approach, he wanted to avoid putting an unfair tax burden on smaller companies still struggling to make a profit.
Stride added that the government hoped to cooperate with the EU and the Organization for Economic Co-operation and Development, on an international solution to taxing these companies more fairly. But failing that, he said the UK was willing to move forward on unilateral changes.
Details could be announced as early as March 13th, when the government will make its Spring Statement, a major annual statement on economic policy. Officials in Germany and France have also expressed that they would prefer tech giants to pay taxes on revenues, in the wake of controversy over tax rates on such firms. Proposals are expected next month from the European Commission.