The CBI understands the government’s desire to make progress on how to reflect the increasing digitalisation of the global economy in the tax system, but does not support the UK government implementing unilateral measures at this stage.
Digital markets are truly global, and there is widespread consensus that the OECD (which brings together over 125 countries) is the right organisation to lead reform in addressing the tax challenges of the digitalisation of the economy. A global solution is the only way to avoid creating a complex patchwork of tax policies that increase compliance burdens, uncertainty over tax positions and ultimately damage global trade, cross-border investment and growth.
The CBI’s consultation response set out the following key points:
- The government should continue to focus its efforts on achieving long-term reform though the OECD and not consider pushing forward with any alternative solution until the OECD has concluded its work
- Revenue-based taxes are economically distortive and have many short comings – given the (potentially) distortive nature of the DST, the CBI called for the government to undertake a through economic impact assessment on the introduction of the DST, including on the wider impact of the tax on the rest of the UK economy
- The DST has the potential to have unintended negative consequences in light of innovation across the whole economy and would affect businesses across all sectors. The introduction of a DST is not aligned with the government’s broader Industrial Strategy to “set a path to make Britain the best place to start and grow a digital business”
- The need to consider the compliance burden on business, especially in light of the unique and complex nature of the DST. If the government is determined that the DST will continue to be implemented, in advance of the OECD conclusions, the design of the DST should be proportionate to its temporary nature and be easy to comply with. The CBI consultation response proposes a number of practical recommendations to government to reduce the burden on business
- There is an ever-growing spotlight on technology business, and in particular many of the businesses which will be subject to the UK DST, regarding the level of data they store on their users. Tracking user locations is increasingly being seen as ethically wrong, and in some cases legally wrong (as a result of GDPR). Further consideration is needed of the challenges business will face in balancing their obligations on data ethics, alongside complying with the DST.
As part of the CBI’s campaign to secure an international tax framework that is truly fit for our future, we will continue to champion member views on this issue and find a solution that will prevent an increase in burden and uncertainty.