UK Updates Digital Economy Tax Position Paper And Consults Platform’s Role

; posted on
March 16th, 2018

Following the first position paper published in 2017 November, on March 13, 2018, the British government updated the position paper to reflect feedback from stakeholders, explaining in more detail how the government thinks this challenge can be solved. On the same day, the government opened a public consultation on how to tax digital economy effectively with the assistance of digital platforms.

Updated Position Paper

At Autumn Budget, the government sets out its initial position on the digital taxation issue. The government found that the current tax system has not kept pace with business model changes in digital context and action is needed. The updated paper does not look to set out the government’s final position on these issues, but sets out the government’s view that:

  • the participation and engagement of users is an important aspect of value creation for certain digital business models, and is likely to be reflected through several channels, such as the provision of content or as a contribution to certain intangibles such as brand.
  • the preferred and most sustainable solution to this challenge is reform of the international corporate tax framework to reflect the value of user participation.
  • as set out at Autumn Budget, in the absence of such reform, there is a need to consider interim measures such as revenue-based taxes.

The updated paper fails to give final solutions to the issue, where UK hopes to find a multilateral solution to this challenge and expects to achieve this with the upcoming OECD report and G20 summit in Argentina.

Public Consultation

The government also consults the public on “Online platforms’ role in ensuring tax compliance by their users”. Indeed, the HMRC has taken measures on online platformsin a number of areas, such as measures to combat VAT fraud in online marketplaces, but it also recognises that the opportunities and challengespresented by the growth of online marketplaces extend beyond VAT. In the consultation, 14 questions are listed to seek for feedbacks, regarding understanding the current landscape and other countries and potential approaches. Feedbacks should be sent by June 8, 2018.

Sources: UK Government - Position Paper, UK Government - Public Consultation

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