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UK digital tax signals what’s to come

UK digital tax signals what’s to come

Could the United Kingdom’s proposed digital services tax be sending a strong signal about the future direction of Australian policy in this area? KPMG’s Merriden Varrall and Mathew McRae explore how such a tax is likely to be received around the world.

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Merriden Varrall

Director, Australia Geopolitics Hub

KPMG Australia

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While the global debate around taxation of digital services grinds slowly on, the United Kingdom (UK) has joined an increasing number of countries looking to ‘go it alone’ by introducing their own special taxes targeting the digital economy. Australia has also released a discussion paper in which it canvasses views on a digital services tax (DST). Other countries, however, are concerned that digital services taxation will unfairly discriminate against large tech companies. While these national, unilateral DSTs are politically popular among domestic constituents, their continued proliferation would be likely to lead to a complex, messy web of rules, so it is to be hoped that a global approach can be agreed sooner rather than later.

In various parts of the world, including the UK and much of the EU, there exists a strong perception among the population that digital companies are not paying ‘their fair share’ of taxes. When the UK announced it would be introducing a DST, discussion in Parliament focused on “ensuring digital services make a fair contribution to the public finances”, improving “sustainability and fairness to the tax system”, and taxing the “digital giants” and using “the proceeds to help small businesses in the high streets”.

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