Spring Statement – taxing the digital economy update

The 'Corporate tax and the digital economy' document published today is an updated version of the original position paper issued in November 2017, in the last Autumn Budget. In the meantime, the Government has sought responses to the original paper from interested parties. That consultation ended on 31 January this year and it is clear that HM Treasury has learned much from the responses it received and from other engagement with representatives of the sector. Not least, this is reflected in the substantial increase in size of the updated document – up from 24 pages to 38.

Although HM Treasury has expanded on all areas of the original paper, there’s a lot more now on what the Government means by 'user-generated value' and why it considers this should be singled out for special tax treatment. However, there’s even more on the Government’s views on what form long-term reform might take, presumably to try to guide and influence the EC and OECD work in this area. This, in fact, now forms the biggest part of the paper (10 of the 38 pages).

By contrast, although there is more detail on the threatened interim measure, the expansion of this section is much less than the other two. It remains to be seen whether this reflects a shift in the Treasury’s attitude in favour of helping to devise a long-term solution on a multilateral basis and away from a unilateral interim solution.

Moore Stephens is currently analysing the updated position paper and will be circulating more detailed thoughts on it shortly.

Also issued at the time of the Spring Statement were two further calls for evidence that relate to the digital economy:
  • ‘Cash and digital payments in the new economy’ is aimed to help the Government better understand the role of cash and digital payments in the economy, and how the transition from cash to digital payments impacts on different sectors, regions and demographics. The document explores how the Government can support digital payments and ensure the ability to pay by cash is still available for those who need it, whilst clamping down on those who use cash to evade tax and launder money.
  • ‘The role of online platforms in ensuring tax compliance by their users’ is aimed to help the Government learn more about this area, including the relationships between platforms and their users and the steps some platforms are already taking to help their users understand and meet tax obligations. It also outlines some measures taken by overseas tax authorities and seeks evidence on the impact of these.

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