The United Kingdom government has announced that it will be taxing Silicon Valley giants who operate on their soil. Such a digital tax is introduced for high turnover companies operating in the UK. But this tax won’t be applicable till the April of 2020, so this provides enough time for the UK government to work out the mechanism. Chancellor of the Exchequer Philip Hammond announced this digital tax in his annual budget speech as a part of UK’s fiscal policy.

Digital Tax is in UK’s annual budget, which won’t kick in until April 2020 in this case, is among a host of economic policies unveiled by Chancellor of the Exchequer Philip Hammond. In other words, the Finance Minister announced quite a few Economic reforms for the Kingdom. So what does he mean by high earning companies that operate in the UK? Keep reading below.

Now according to the budget layout unveiled by the Chancellor of the Exchequer, Profitable digital companies and ventures with revenue of more than £500 million ($640 million, US) per year globally will be legally asked to pay 2% on revenues generated within the UK. This exact amount is the one that reflects the value of their UK users. This marks a shift in the current taxation regime in the UK whereby current foreign companies are taxed solely on their UK profits. The current tax regime (till 2020) is rather much lenient in most cases.

The introduction of this tax is called UK Digital Services Tax and has been introduced to divide the burden of taxation. This calculated move by the UK Parliament will ensure that the tech giants shoulder the burden of the exchequer. The taxation policy that will kick off from the financial year of 2020 is strategized to protect startups in the UK. It provided maximum leverage to the start-up firms in the UK vis-a-vis the established tech giants.

In other words, it also means that the government in the UK is looking to provide incentives to the local, smaller tech companies, startups and encourage innovation at the expense of the bigger ones. But the response has been varied across the kingdom itself, for example, techUK- industry group has formally disagreed in their assessment of the taxation policy. According to them such a taxation regime if put into place will harm UK’s ratings and reputation as an economically friendly start-up place or the best place to start a business in the sector of technology. More as we have it.

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