LONDON: In his BBC interview, Stride said that the digital age had created “a type of model of business where it’s actually difficult, using existing tax rules, to actually apply what most people would feel was a fair level of tax to those businesses”.
“At the moment 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,” he said.
Stride said that although the government was keen to work with international partners on a new model, it was also prepared to “unilaterally enter into various changes” if this was not possible.
Consultation on a UK government paper on corporate tax and the digital economy closed at the end of January. The paper, published alongside the Budget in November, set out potential short, medium and longer term solutions to the increasingly difficult political problem of how to make sure that digital businesses pay their “fair share” of tax, based on the concept of “user-generated value”.
The paper suggested the introduction of a revenue-based tax as an interim measure, although it raised a number of potential issues. These included the difficulty in accurately capturing value, issues around double taxation and the risk that, in the early years of a digital business in particular, a sales tax would risk being an additional burden on a loss-making business.
