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What Every Tech Company Should Know About Europe’s Digital Services Tax

The UK and the EU are eyeing big scores by drafting new tax laws aimed at tech companies, but Washington, and some Euro businesses are crying foul.

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A Modest British Proposal

Chancellor Philip Hammond, the head of the U.K.’s treasury department, on Monday spoke at parliament where he proposed a “narrowly targeted tax” on “established tech giants.”

“They pose a real challenge to the sustainability and fairness of our tax system,” he said in the address. “The rules have simply not kept pace with changing business models. And it is clearly not sustainable or fair that digital platform businesses can generate substantial value in the UK without paying tax here in respect of that business.”

The 2-percent tax would apply to tech companies with revenues greater than $640 million (500 million pounds) a year and which also do business in the UK. He expects the measure to raise $512 million (400 million pounds) a year. Unlike its EU counterpart this plan is not aimed at services and does not look at the number of users or transactions, but rather it is pointed squarely at global revenues of the business. However, Hammond does not expect the tax to be put into effect until April 2020 and details of the plan are not settled, he said.

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