The UK government has denied that it plans to scrap the “Amazon Tax” following reports it was to be dropped because it would not raise enough money.
The Digital Services Tax, which was introduced by the government on April 1, was set up to ensure search engines, social media services and online marketplaces which derive value from UK users pay their fair share of taxes, adding a two per cent levy on all revenues made in the country.
According to a report in the Mail on Sunday, chancellor of the exchequer Rishi Sunak was preparing to drop the tax, which is expected to raise £500 million a year for the government.
An unnamed source told the publication that Sunak had concluded that “just half a billion quid” was not enough to negate the drawbacks of keeping the tax in place.
The government has denied this report, stating that it’s 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.”
Primarily the tax threatens the UK’s trade relationship with the US, which has been made all the more important post-Brexit due to the state of the economy following the pandemic.
President Donald Trump slammed the tax and threatened to impose tariffs on UK goods if it went ahead, alleging that it unfairly targeted US firms.
Meanwhile Amazon has effectively side-stepped that tax, passing the new levy directly on to its sellers by raising seller fees by two per cent.
Amazon told its sellers earlier this month: “While the legislation was being passed, and as we continued our discussions with the government to encourage them to take an approach that would not impact our selling partners, we absorbed this increase.”