Ditching tax on tech firms will mean less money for key workers, says Labour | Tax and spending

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Labour has told Rishi Sunak that if the UK Treasury scraps a tax on technology companies such as Facebook, Google and Amazon it would mean losing out on enough money to pay for tens of thousands of key workers in Britain.

The shadow chancellor, Anneliese Dodds, said there were serious questions about a potential multibillion-pound black hole in the Treasury’s finances that needed urgent clarification.

Her intervention comes after a report suggested ministers were preparing to ditch Britain’s digital services tax – a levy of 2% on the revenues tech companies derive from UK users – because it could jeopardise a post-Brexit trade deal with the US.

In a letter to the chancellor, Dodds said the future of £465m in revenue from the digital services tax had been thrown up into the air, warning this was equivalent to the cost of employing 13,000 nurses, 8,700 teachers or 8,600 police officers.

Sources told the Mail on Sunday last weekend the tax was “more trouble than it is worth” and that ministers could scrap it to secure a favourable trade deal with Donald Trump’s White House. Although the Treasury poured cold water on the report, it also confirmed the tax would be removed once a “global solution” over taxing technology firms could be reached with other countries.

Sunak had written a letter in June alongside EU finance ministers demanding that big tech firms pay more tax to help fund the recovery from the coronavirus outbreak. The Treasury is also considering whether to launch a digital sales tax as part of its plans to reform business rates.

However, Dodds said the chancellor urgently needed to clarify the government’s position, and that much more needed to be done to tax big technology companies.

“This government promised to make tech giants pay a fair share of tax to support our public services. Scrapping the digital services tax will do the opposite, costing millions in revenue that could pay for thousands of nurses, teachers or police officers,” she said. “It’s another example of incompetence from a government that is holding back Britain’s recovery.”

A spokesman for the Treasury said: “The digital services tax is a proportionate measure that ensures that tech firms pay their fair share of tax in the UK. We’ve been clear it’s a temporary tax that will be removed once an appropriate global solution is in place – and we continue to work with our international partners to reach that goal.”

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