The UK Finance Bill provisions on the digital services tax (DST) and proposed new clauses and amendments affecting them were discussed at the Report Stage in the House of Commons yesterday, Wednesday 1 July. There were no changes agreed to the draft legislation in this area. The DST proposals will now proceed to Royal Assent, expected mid-July as there is no further opportunity for them to be amended (House of Lords reviews being largely advisory/ procedural for a Finance Bill).
There had been some flurry of interest as 22 MPs proposed a late change that would require DST payers to publish a tax strategy including a country-by-country report. The group comprised largely backbench Labour MPs but included three Conservative MPs, a LibDem MP and a Green Party MP. The Financial Secretary to the Treasury, Jesse Norman, explained that many groups with in-scope activities giving rise to a UK DST charge would have a UK affiliate that would have to publish a tax strategy anyway. He also said that the Government was encouraging businesses to voluntarily publish country-by-country information. Unilaterally requiring publication of country-by-country reports is contrary to Government policy as this could provide an incomplete and misleading picture. It could also drive groups to restructure to avoid disclosure in the UK, potentially moving HQs out of the UK. This new clause was not, in the end moved to a vote (it was effectively withdrawn).
Other amendments and new clauses were discussed that sought to impose additional Government reporting on the effectiveness of the provisions ahead of the proposed review by the end of 2025. There were also calls for the government to expand the scope of the DST highlighting that the current design does not ensure a level playing field between online retailers and high-street, bricks-and-mortar retailers and it does not cover streaming services.
The arguments on Government reviews were the same as were raised and defeated in the Committee Stage and only one was this time put to a vote. The proposal to require a review “within a year of Royal Assent and annually thereafter” was defeated by nearly 100 votes.
Royal Assent will be a trigger for many groups to have to accrue for the potential UK DST liability. They may need help with assessing their in-scope activities, configuring their data to determine associated revenues from these activities, assessing their compliance obligations and commercial/ legal issues including existing contracts and who should bear the tax. We can help with all these aspects.