Lord Leigh of Hurley (Con):...DST—digital services tax, which I
will come on to again in a minute—was put in place to ensure that
profits generated from UK customers were taxed here. Clearly,
future tax should be based on user bases rather than sales made—not
just customers, but user bases. As we know, sales to UK customers
are currently often based in places such as Ireland, but the goods
are delivered here. DST seeks to achieve proper taxation on this,
but we need to know how pillar 1...Request free trial
(Con):...DST—digital services tax, which I
will come on to again in a minute—was put in place to ensure that
profits generated from UK customers were taxed here. Clearly,
future tax should be based on user bases rather than sales made—not
just customers, but user bases. As we know, sales to UK customers
are currently often based in places such as Ireland, but the goods
are delivered here. DST seeks to achieve proper taxation on
this, but we need to know how pillar 1 will do so likewise, as the
expectation is that DST will be dropped at some point.
Perhaps the Minister can assure us on that point.
Meanwhile, the pillar 2 proposals are encouraging, but I urge some
caution. The IPPR issued a report estimating that with a global
minimum rate of 21%, our take could be £14.7 billion. That would be
nice, but at a global rate of 15% now being suggested, our share
would be much lower. Let us not forget that we already have
controlled foreign corporation legislation in place—I think it may
have been introduced by my noble and learned friend Lord Clarke,
but it may have been before his time—and that this legislation
seeks to equalise UK-headquartered corporations’ tax take. I am
indebted to Glyn Fullelove, formerly president of the Chartered
Institute of Taxation, for sharing with me his calculations, which
suggest that a figure nearer to £2 billion or £3 billion could be
the amount raised by the pillar 1 and 2 proposals. Perhaps HM
Treasury could share its estimates with us at some point.
We introduced the digital services tax so that
companies such as Amazon would pay their fair share. Unfortunately,
it is not working as well as it should. First, Amazon, which
clearly has monopoly-type power, has simply told its suppliers to
pay. Secondly, it applies only to marketplace fees, not to direct
sales. This is a very important difference. It is another area I
was disappointed not to see mentioned in the Finance Bill, as we
now have the situation where DST has made it harder for SME
retailers to compete with Amazon.
The current DST legislation is defective in not
taxing the user-created value arising from sales made by
marketplace providers on their own account. Additionally, the
application of DST to marketplace fees and commissions
charged to third parties, without a corresponding charge arising on
the value created when the provider uses the platform to make sales
on its own account, is a distortion to competition. I and a number
of others have proposed that the scope of DST be extended, so that when a
marketplace provider uses the marketplace for its own sales—or uses
a similar platform alongside the marketplace—an amount of digital
services revenue, which can be taxed, arises.
As the Minister might be aware, I have discussed these ideas with
the Financial Secretary, who is resistant to changing DST at this point. As a result, there
is nothing in the Bill on this issue. I hope, however, that the
Government will reconsider this matter, as we are quite a way from
a final deal on a pillar 1 and 2 agreement and, in the interim, we
are losing a very large amount of revenue...
(Con):...My noble friend also asked
about the digital services tax and pillar 1. The
UK digital services tax is an interim solution to
the widely held concerns with international corporate tax, and the
Government’s strong preference is to secure a comprehensive global
solution on digital tax and remove the DST once this is in place. We are
pleased at the progress that has been made in recent days towards
securing that solution but recognise that there is still work to do
in reaching wider agreement among the OECD key 20 countries ahead
of July. The Government’s efforts will be focused on that
objective...
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