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UK announces digital services tax on tech giants

Technology giants will have to pay more tax in the UK under new regulations unveiled by the Government today.

In his Budget statement this afternoon, Chancellor Phillip Hammond revealed a two percent "digital services tax" on large tech firms such as Amazon, Facebook and Google.

From April 2020, large social media platforms, search engines and online marketplaces will pay a 2 percent tax on the revenues they earn which are linked to UK users.

The tax follows increasing pressure from both the public and politicians to take action against multi-billion dollar firms paying low rates of tax in the UK.

Both Google and Facebook have been criticised for paying little taxes in previous years, largely by centering their UK operations in Ireland to avoid higher charges.

Revealing the tax in Parliament, Hammond said that it will be, "carefully designed to ensure it is established tech giants – rather than our tech start-ups - that shoulder the burden of this new tax.”

The news follows a similar move by the EU earlier this year which looked to make companies pay a three per cent tax on turnover for their online services. 

The new tax would bring in an estimated €5bn and the proposal would affect Google, Facebook and other firms with global annual revenues over €750m and taxable EU revenue above €50m. 

The Commission found that the top digital firms pay an average tax rate of just 9.5 per cent in the EU which is far less than the 23.3 per cent paid by traditional companies. 

Mike Moore is Deputy Editor at TechRadar Pro, and has worked as a B2B and B2C tech journalist for nearly a decade, including at one of the UK's leading national newspapers and ITProPortal.