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Digital services tax risks Big Tech scrutiny failure, MPs warn

Digital tax
Image credit: chrisdorney via Shutterstock

The digital services tax (DST) is not effectively scrutinising Big Tech companies like Apple and Facebook that are operating in the UK, MPs have warned.

In a new report, MPs on the cross-party public accounts committee said that while the digital services tax raised 30% more than expected – bringing in £358m from tech firms – the “successful implementation” would not last.

The government introduced the temporary tax in 2020 as a 2% charge on revenue generated through digital business in the UK following criticism against tech giants like Google and Amazon for avoiding contributions.

The report warned that because the levy was designed to be temporary, HMRC was at risk of ignoring its efficacy.

Liberal Democrat MP Sarah Olney described the DST as a “holding tax” and said “the risk is that because of that, it is not being reviewed properly and levels of avoidance and evasion are not being properly scrutinised”.

Olney added: “The fact that the DST generated so much more than HMRC had predicted suggests there is some kind of flaw in their forecasts. If there is a flaw in their forecast, how can we really know whether companies are managing to avoid it?”

The DST is targeted at firms with £500m of global revenue from digital services that also have at least £25m in revenue from UK users.

The tax is a temporary one, introduced in some form or other by many other nations, including Italy, France, and Spain. The DST will eventually be replaced by a global tax policy on digital profits to be agreed by the OECD.