Digital Services Tax

Public Accounts Committee Closed Inquiry
Opened: 31 Oct 2022 Closed: 27 Jun 2023 Parliament page
In April 2020 HM Revenue & Customs (HMRC) introduced the Digital Services Tax, a 2% tax on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users. The government expects to remove this tax when international reforms proposed by the Organisation for Economic … Read more
4 Recommendations
16 Conclusions
1 Report
1 Oral session
2 Letters
1 Event
Activity timeline 6 events
27 Jun
2023
Report published
27 Jun
2023
Correspondence
5 Apr
2023
Report published
12 Jan
2023
Correspondence
8 Dec
2022
Oral evidence
8 Dec
2022
Formal meeting (oral evidence session) · The Grimond Room, Portcullis House
Oral evidence sessions 1 session
8 Dec 2022
View on parliament.uk
Digital Services Tax
Jim Harra · HMRC Jon Sherman · HMRC Mike Williams · HM Treasury
Title HC No. Published Items Response
Forty-Fourth Report - The Digital Services Tax HC 732 5 Apr 2023 20 Responded
Recommendations & Conclusions
20 results
2 Recommendation Accepted
Forty-Fourth Report - The Digital …
HMRC implemented the Digital Services Tax with little cost, and the experience could provide valuable...
HMRC implemented the Digital Services Tax with little cost, and the experience could provide valuable lessons for other new taxes. HMRC implemented the tax on schedule for only £6.3 million, less than budgeted, though there will be ongoing compliance costs. … Read more
Government Response
The government agrees and says HMRC carries out an evaluation on the implementation of all measures that require new or updated systems and processes, and that they have since implemented other taxes learning lessons from the design and implementation of DST.
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3 Recommendation Acknowledged
Forty-Fourth Report - The Digital …
There are obvious challenges facing the OECD in implementing the multilateral Pillar One reforms to...
There are obvious challenges facing the OECD in implementing the multilateral Pillar One reforms to the planned timetable, which could have major implications for the future of the Digital Services Tax. Some other countries, including France for example, have also … Read more
Government Response
The government agrees and reiterates the target implementation date is 2024, describing Amount A of Pillar One and stating that Parliament will be able to scrutinise and ratify the convention through normal Parliamentary procedures before Amount A of Pillar One is implemented.
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4 Recommendation Accepted
Forty-Fourth Report - The Digital …
HM Treasury and HMRC have a vital role in ensuring that the multilateral assurance framework...
HM Treasury and HMRC have a vital role in ensuring that the multilateral assurance framework for Pillar One of the OECD reforms will meet Parliament’s desire for accountability and transparency. The 140 jurisdictions involved in the development and implementation of … Read more
Government Response
The government agrees and will write to the committee with the UK's objectives for the multilateral administrative framework, including audit arrangements and states that the forecasted revenues for Amount A will be published in the usual way after OBR scrutiny, at a future fiscal event.
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5 Recommendation Not Addressed
Forty-Fourth Report - The Digital …
There is a significant risk that the Digital Services Tax may require extension beyond its...
There is a significant risk that the Digital Services Tax may require extension beyond its intended lifespan, and that this could prompt changes in taxpayer behaviour. Should the OECD reforms be delayed beyond 2024, the Government is required by law … Read more
Government Response
The government response focuses on Department for Business and Trade efforts to recoup local authority grant payments made in error in the first wave of Covid support schemes, but it does not address the need for HMRC to develop a contingency plan for the potential extension of the Digital Services Tax and a robust process for addressing non-cooperation with its compliance regime.
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1 Conclusion Acknowledged
Forty-Fourth Report - The Digital …
On the basis of a report by the Comptroller and Auditor General, we took evidence...
On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Treasury and HM Revenue & Customs (HMRC) on the Digital Services Tax.1 The government introduced the Digital Services Tax in April 2020 because … Read more
Government Response
The government acknowledges the committee's conclusion by summarizing the Digital Services Tax and its intended purpose as an interim solution until the OECD reforms are introduced.
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6 Conclusion Acknowledged
Forty-Fourth Report - The Digital …
The Digital Services Tax is an interim solution to meet a perceived a lack of...
The Digital Services Tax is an interim solution to meet a perceived a lack of ‘fairness’ in the current system, and is not on its own intended to deliver a ‘fair’ system, or to level the playing field between online … Read more
Government Response
The government acknowledges the committee's conclusion, stating that the DST is a pragmatic interim solution focused on businesses for which the policy concern is most relevant and administrative burdens are considered manageable, and that tax policy is kept under constant review.
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7 Conclusion Acknowledged
Forty-Fourth Report - The Digital …
HMRC did not take the view that the tax was significant enough to have a...
HMRC did not take the view that the tax was significant enough to have a noticeable additional burden on businesses. However, evidence submitted to us by one travel business complained of the greater impact on those operating high-volume, low-margin businesses.18 … Read more
Government Response
The government acknowledges the committee's conclusion, stating that the DST is a pragmatic interim solution focused on businesses for which the policy concern is most relevant and administrative burdens are considered manageable, and that tax policy is kept under constant review.
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8 Conclusion Acknowledged
Forty-Fourth Report - The Digital …
Since 2013, the Organisation for Economic Co-operation and Development (OECD) and the G20 group have...
Since 2013, the Organisation for Economic Co-operation and Development (OECD) and the G20 group have worked together under the ‘Base Erosion and Profit Shifting’ project, and subsequently with around 140 countries and tax jurisdictions under the ‘Inclusive Framework on Base … Read more
Government Response
The government's response describes Amount A and Amount B of Pillar One of the OECD reforms.
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9 Conclusion Acknowledged
Forty-Fourth Report - The Digital …
The Digital Services Tax is intended to fill the gap until the implementation of Pillar...
The Digital Services Tax is intended to fill the gap until the implementation of Pillar One, albeit as a ‘second-best’ solution.23 Other countries have also introduced a Digital Services Tax, including France, Italy, Spain and Austria.24 HM Treasury told us … Read more
Government Response
The government acknowledges the committee's conclusion, stating that the DST is a pragmatic interim solution focused on businesses for which the policy concern is most relevant and administrative burdens are considered manageable, and that tax policy is kept under constant review.
HM Treasury
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10 Conclusion
Forty-Fourth Report - The Digital …
Pillar One’s scope will differ from that of the Digital Services Tax.
Pillar One’s scope will differ from that of the Digital Services Tax. First, it will be a tax on profits rather than revenues. Second, it will apply to a much broader range of activities as it is not simply aimed … Read more
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11 Conclusion
Forty-Fourth Report - The Digital …
It is unclear how the receipts from Pillar One will compare to the Digital Services...
It is unclear how the receipts from Pillar One will compare to the Digital Services Tax as HMRC has not yet modelled the likely receipts from businesses liable to pay Pillar One, prior to agreement being reached on how profits … Read more
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12 Conclusion
Forty-Fourth Report - The Digital …
Legislative decisions, implementation decisions and the operation of compliance regimes for Pillars One and Two...
Legislative decisions, implementation decisions and the operation of compliance regimes for Pillars One and Two will be carried out in line with agreed conventions and frameworks.34 In July 2022 the OECD announced that the multilateral convention which will implement Pillar … Read more
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13 Conclusion
Forty-Fourth Report - The Digital …
Legislative decisions, implementation decisions and the operation of compliance regimes for Pillars One and Two...
Legislative decisions, implementation decisions and the operation of compliance regimes for Pillars One and Two will be carried out in line with agreed conventions. As previously stated, the OECD’s Pillar One is due to supersede the Digital Services Tax in … Read more
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14 Conclusion
Forty-Fourth Report - The Digital …
The Chartered Institute of Taxation describes the Digital Services Tax as a ‘blunt instrument’.43 There...
The Chartered Institute of Taxation describes the Digital Services Tax as a ‘blunt instrument’.43 There are aspects of the tax’s design that are tolerable in the short-term but would need to be addressed if its life was to be extended … Read more
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15 Conclusion
Forty-Fourth Report - The Digital …
As long as Pillar One is introduced at some point, these issues will be partly...
As long as Pillar One is introduced at some point, these issues will be partly offset by the fact that those businesses paying Digital Services Tax and Pillar One will be able to reduce their Corporation Tax payments by the … Read more
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16 Conclusion
Forty-Fourth Report - The Digital …
HMRC’s compliance work on 2020–21 payments of the Digital Services Tax was ongoing when we...
HMRC’s compliance work on 2020–21 payments of the Digital Services Tax was ongoing when we took evidence in December 2022.50 This has proved a much larger task than anticipated, as the number of business groups within the scope of the … Read more
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17 Conclusion
Forty-Fourth Report - The Digital …
HMRC and HM Treasury said that they have not seen any evidence of tax avoidance...
HMRC and HM Treasury said that they have not seen any evidence of tax avoidance so far, for example by changing business models, as businesses have not regarded it as worth their while. But they assured us that they are … Read more
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18 Conclusion
Forty-Fourth Report - The Digital …
As stated above, HMRC has not yet faced the situation where an overseas-based business refuses...
As stated above, HMRC has not yet faced the situation where an overseas-based business refuses to pay the correct amount of tax as assessed by HMRC. HMRC told us that it has bilateral and multilateral agreements with other countries that … Read more
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19 Conclusion
Forty-Fourth Report - The Digital …
Pillar One will operate within a multilateral administrative framework, with the emphasis on international cooperation.
Pillar One will operate within a multilateral administrative framework, with the emphasis on international cooperation. This will be very different to how HMRC currently ensures compliance with its tax regime.58 Getting 140 tax jurisdictions to agree on a framework for … Read more
HM Treasury
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20 Conclusion
Forty-Fourth Report - The Digital …
There is a delicate line to tread between accountability, transparency and the maintenance of taxpayer...
There is a delicate line to tread between accountability, transparency and the maintenance of taxpayer confidentiality. The Digital Services Tax illustrates how difficult it is to talk about these issues in a way that protects confidentiality when you are dealing … Read more
HM Treasury
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Government Response AI assessment · 9 of 4 classified
Accepted 2
Acknowledged 6
Not Addressed 1
Total 4 recs + 16 conclusions
Correspondence 2 letters
27 Jun 2023 Joint correspondence from Beth Russell, Second Permanent Secretary, HM Treasury, and Jim Harra, Chief Executive and First Permanent Secretary, HM Revenue & Customs, re Forty-Fourth Report of Session 2022-23 – Digital Services Tax, dated Forty-Fourth Report of Session 2022-23 – Digital Services Tax
Parliament page
12 Jan 2023 Correspondence from Victoria Atkins MP, Financial Secretary to the Treasury, re update on Making Tax Digital, dated 19 December 2022
Parliament page