UK to enforce tax for e-commerce

Reuters, LONDON

Britain on Wednesday announced measures to tackle tax avoidance by tech giants and to hold online marketplaces like eBay Inc and Amazon.com Inc accountable for tax evasion via their platforms.

British Chancellor of the Exchequer Philip Hammond said some multinationals were avoiding tax on profits generated from selling to UK customers by using intergroup royalty payments to shift those profits into affiliates in low-tax jurisdictions.

Britain would impose a withholding tax on such payments that could raise about ￡200 million (US$266 million) a year, he said.

Hammond said he was targeting “digital businesses,” but the description of the measure in his budget statement suggested that they could cover all companies.

A 2012 Reuters investigation showed how intergroup royalties had helped fast food groups, including McDonald’s Corp and Burger King, reduce their tax bills.

Hammond also said he would hold online marketplaces responsible for paying value-added-tax — a form of sales tax — when sellers on the platforms do not collect and pay the tax.

Up to ￡1 billion might be lost each year due to such tax evasion by sellers on eBay and Amazon alone, an April report by the National Audit Office showed.

Dominic Stuttaford, head of European tax for the Norton Rose Fulbright law firm, said the law needed to be updated to tackle such problems, but that the actual effect would be unclear until more details were published.

Meanwhile, the UK government is planning to introduce a capital-gains tax on foreign buyers of commercial property, potentially disrupting the flow of money into London office buildings in the wake of Brexit.

The tax would be levied on gains made by non-residents on sales of all types of UK property, extending existing rules that apply only to homes, a consultation document published alongside Hammond’s budget on Wednesday said.

Overseas investors dominate London’s property market, lured by big buildings with long leases to major corporations and a stable legal environment. Foreign investors currently account for about 75 percent of central London investment, research by broker Colliers International Group Inc showed.