The government is expected to introduce a tax levy for technology businesses, who are based in tax havens.
The ‘digital services tax’ however has come under big scrutiny from the US and from the businesses that it is targeting.
In this blog we take an in depth look at the expected Digital Services Tax, and why it might hit small businesses on Amazon the hardest.
What Is The Digital Services Tax?
The Digital Services Tax will be a 2% tax on the revenues of technology businesses.
This means that search engines, social media platforms and online marketplaces which obtain value from UK users will be affected.
This is partly because many of these companies are based in tax havens, whilst others operate mainly online and not on the high street, avoiding business rates.
The government expects that this new tax will bring in £500m a year.
Why Will This Impact Small Business Owners?
It seems very likely that this new tax, will in fact hit small business owners the hardest.
Amazon, one of the businesses targeted by the Digital Services Tax, has said that it is considering passing on the cost of the planned 2% tax levy onto the small businesses that sell through it.
The reason why this looks so certain, is because Amazon have already used a similar strategy over in France.
In July 2019, France introduced a 3% levy and Amazon responded by charging its small business sellers by the same amount.
Therefore it looks extremely likely that they will do the same to UK Small Business sellers, if the Conservatives move ahead with the Digital Services Tax.
Worldwide Pressure To Reconsider The Tax
The US treasury secretary has also expressed his unhappiness about the Digital Services Tax, believing that it discriminates against US multinationals, who have worked hard to take their big businesses worldwide and are set to be punished for it.
He has also stated that there will probably be retaliation from the US, perhaps a tax on UK car exports to the US if the Digital Services Tax is imposed.
Amazon’s UK Country Manager Doug Gurr explained to the Financial Times that if the UK is not careful, they will hit their small business sector with this new tax:
“If you are not careful in the design, these taxes can actually hit all of the small businesses that use our services. The majority of sales on our marketplace are independent businesses. If that tax is passed on to them, that is quite a significant hit.”
As of this week the Chancellor, Sajid Javid, has insisted that plans to to implement the Digital Services Tax will move ahead for an April 2020 introduction.
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