Forty-Fourth Report - The Digital Services Tax

Select Committee
Public Accounts Committee HC 732 5 April 2023
Report Status Response document linked Recorded deadline: 5 Jun 2023

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Conclusions & Recommendations 20 items (4 recs)
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Government response
Treasury minutes: Government response to the Committee of Public Accounts on the Forty fourth report from Session 2022-23 · published 27 Jun 2023
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Recommendations & Conclusions

20 results
2 Recommendation
HMRC implemented the Digital Services Tax with little cost, and the experience could provide valuable...
Recommendation
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
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3 Recommendation
There are obvious challenges facing the OECD in implementing the multilateral Pillar One reforms to...
Recommendation
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
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4 Recommendation
HM Treasury and HMRC have a vital role in ensuring that the multilateral assurance framework...
Recommendation
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
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5 Recommendation
There is a significant risk that the Digital Services Tax may require extension beyond its...
Recommendation
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
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1 Conclusion
On the basis of a report by the Comptroller and Auditor General, we took evidence...
Conclusion
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
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6 Conclusion
The Digital Services Tax is an interim solution to meet a perceived a lack of...
Conclusion
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
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7 Conclusion
HMRC did not take the view that the tax was significant enough to have a...
Conclusion
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
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8 Conclusion
Since 2013, the Organisation for Economic Co-operation and Development (OECD) and the G20 group have...
Conclusion
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
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9 Conclusion
The Digital Services Tax is intended to fill the gap until the implementation of Pillar...
Conclusion
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
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10 Conclusion
Pillar One’s scope will differ from that of the Digital Services Tax.
Conclusion
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
It is unclear how the receipts from Pillar One will compare to the Digital Services...
Conclusion
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
Legislative decisions, implementation decisions and the operation of compliance regimes for Pillars One and Two...
Conclusion
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
Legislative decisions, implementation decisions and the operation of compliance regimes for Pillars One and Two...
Conclusion
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
The Chartered Institute of Taxation describes the Digital Services Tax as a ‘blunt instrument’.43 There...
Conclusion
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
As long as Pillar One is introduced at some point, these issues will be partly...
Conclusion
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
HMRC’s compliance work on 2020–21 payments of the Digital Services Tax was ongoing when we...
Conclusion
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
HMRC and HM Treasury said that they have not seen any evidence of tax avoidance...
Conclusion
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
As stated above, HMRC has not yet faced the situation where an overseas-based business refuses...
Conclusion
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
Pillar One will operate within a multilateral administrative framework, with the emphasis on international cooperation.
Conclusion
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
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20 Conclusion
There is a delicate line to tread between accountability, transparency and the maintenance of taxpayer...
Conclusion
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
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