Does he mean it? Will he even be in a position to impose it? Will Brexit make it more or less likely? Those are the questions surely ringing around digital marketing circles and in the boardrooms
of the tech giants today, after the Chancellor, Philip Hammond, reiterated the threat of raising
a new digital
tax.
He took to the podium at today's Conservative party conference today to stress again that if the tech giants don't play their part in funding public services (ie., by paying their fair
share of tax), then he would be forced to find another way to tax them. Again, we have reference to this being better done by international agreement, but if that cannot be reached, the UK will act
alone with the so-called "digital services tax."
It's hard to know how much of this is sabre rattling or a real warning. The pledge does go back to the party manifesto a year ago and has been
talked up a couple of times but, let's face it, when it comes to agreements on international trade and tax, the subject of Brexit looms a lot larger on the immediate horizon than the US tech
giants.
As soon as any politician puts together the words "international" and "agreement," you know full well that we are talking years of wrangling.
That is not to say that
Google and Facebook and the rest of the tech giants that use fancy accounting to avoid their fair share of UK tax can rest too easily. Public opinion is very much running against companies who suck
budget out of our markets and have the profits whipped away by an accountant skilled by the art of (legally) avoiding, rather than (illegally) evading tax. The end result is much the same,
however.
There are two possibilities here. One is that if the UK remains in the EU through a second referendum, or strikes a deal where it is an EU rule taker on trade, which would obviously
mean a defeat of the current Government or a massive piece of back-peddling. If either of these two similar outcomes were to take place, then the international cooperation that Hammond needs is more
likely to happen. The rest of the EU is equally frustrated by the tech giants, and would be keen to make sure that money earned in Europe is taxed there.
However, if the UK leaves the EU
without a trade, a "hard" Brexit, or if it manages to strike a deal where it is not a taker of trading rules, then we have an altogether different scenario.
It does not take too long to
realise that the UK would be knocking on the White House door for a trade deal if the latter were the case and, despite what President Trump says domestically about US companies needing to do more
business at home and so pay their taxes in the US, a tech giant "digital services tax" would go down like a lead balloon. A tax singling out the star players from a country you want to conduct a trade
treaty with? It's not the best opening line.
Plus, if the UK were standing alone on the edge of Europe, the chances are that it would want to give the tech giants every reason to remain
headquartered in the UK, particularly if the EU were to ever press ahead with a similar levy.
So if I were the tech giants, I'd not see this as an immediate threat. It's either going to be
dropped so the UK can talk trade with Trump and be a tech centre on the edge of the EU, rather than in it. Or if little changes between the EU and the UK, then it will take years of wrangling to turn
threats into action.