New tax on global digital businesses

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To try and ensure that digital businesses pay tax that reflects the value they derive from UK users, the government has announced that it will introduce a Digital Services Tax (DST) which will raise £1.5bn over four years from April 2020.

The DST applies a 2% tax on the revenues of specific digital business models where their revenues are linked the participation of UK users. The tax will apply to:

  • search engines
  • social media platforms
  • online marketplaces.

The above have been chosen as the government considers these business models derive significant value from the participation of their users.

Note however that the DST is not a tax on online sales of goods – as a result it will only apply to revenues earnt from intermediating such sales, not from making the online sale.