The Treasury will be cracking down on tech giants, threatening companies such as Facebook (NASDAQ: FB), Google (NASDAQ: GOOGL) and eBay (NASDAQ: EBAY) with a new tax system.
Mel Stride, the financial secretary to the Treasury, said on Thursday that more should be done to ensure tech giants pay “fair” levels of tax.
“At the moment [they] are generating very significant value in the UK, typically through having a digital platform with lots of users interacting with that platform,” he told the BBC.
“That is driving a lot of value, so you’re looking at social media platforms, online marketplaces, internet search engines – where at the moment the tax regime is not taxing those activities fairly.
“We want to move to a situation where we are taxing those activities fairly.”
Stride suggested taxing companies’ revenues rather than profits, although made clear that he planning to harm small companies or start-ups that were struggling to make a profit.
“One important point to make right up front is we’re not talking about tax avoidance, evasion or non-compliance, we’re talking about the way the system works,” he said.
“And we recognise that in the 21st century, the digital age, there’s a type of model of business where it’s actually difficult, using existing tax rules, to actually apply what most people would feel was a fair level of tax to those businesses.”
Eileen Burbidge, from Tech City UK, said: “I don’t think the multi-national tech companies have been any different than any other commercially minded business, in that they’re certainly willing to pay their fair share or their responsible share of tax.”
Tech giants such as Facebook have been criticised in the past over the amount of tax they have been paying. Last year the social media group paid only £5.1 million in corporation tax in the UK. This was despite revenues totalling almost £842.4 million.