Digital Services Tax branded 'half-baked' as intent to catch Apple appears to miss the mark

Chris Denning, head of international and corporate taxation, MHA MacIntyre Hudson, points to widespread confusion around the new tax, and questions its ability to catch the firms it apparently has in its sights

Chancellor Philip Hammond's Digital Services Tax (DST), designed to catch out tax-avoiding US tech giants and force them to pay for revenue generated in the UK, has been branded 'half-baked'.

Alongside widespread consternation in the US that their firms are apparently being targeted, Chris Denning, head of international and corporate taxation at accountancy firm MHA MacIntyre Hudson, has questioned its ability to catch the firms it apparently has in its sights.

He also pointed to a lack of consensus around the tax, and how exactly it will work.

"There have been various stories about other countries following suit but little agreement as to the form a DST should take and who it should impact," said Denning.

He continued: "As if to illustrate France has today announced its version of DST to come into effect on 1 January 2019 but has released no details as to how it will apply and who it will effect. Given that 1 January is only two weeks away this is quite an unusual approach."

He added that the tax is also designed to catch Apple, but will likely miss the mark due to the tech giant's business model, which relies on selling hardware rather than services.

"Reports do however suggest it will not only impact the usual suspects i.e. Amazon, Google and Facebook, but also that Apple is now in the frame.

"This is interesting because Apple as we all know does not sell digital services. Apple sells bits of kit i.e. phones, laptops, etc.

"If the reports are correct and Apple is intended to be caught, this simply reinforces the complete lack of international agreement and understanding as to what digital services are and how they should be taxed. The UK's DST will specifically not impact businesses selling their own tangible or intangible products to end users through a digital medium.

"There is clearly a long way to go for the international tax community to come up with a sensible methodology to impose tax where the value is derived on digital business models.

"The concern in the meantime is that territories keen to get in on the act come up with politically motivated half-baked proposals that will simply add more confusion, complexity and cross border animosity in an area that can only move forward on an international cohesive basis."