The Chartered Institute of Taxation (CIOT) has urged the government to make its planned Digital Services Tax (DST) a 'temporary fix' to the issue of taxing online businesses.
The DST is set to take effect from April 2020, and will apply a 2% tax to the revenues of certain digital businesses. A double threshold will exist, meaning that businesses will have to generate revenues from in-scope business models of at least £500 million globally to become taxable under the DST.
The CIOT stated that the UK's DST should 'ideally last no longer than five years'. It has also called for the government to repeal the DST 'as soon as there is a multilateral agreement' through the Organisation for Economic Co-operation and Development (OECD) on a 'global method' to tax digital businesses.
'Given the nature of the tax, a pragmatic approach will be required in order for it to be implemented effectively,' said Glyn Fullelove, Chair of the Technical Committee at the CIOT.
'This is because revenue taxes such as this are a blunt instrument that cannot accurately represent the tax on the profits related to user-based value on all businesses on which it is imposed. It will inevitably over-tax some companies and under-tax others.'
In regard to international developments on the matter, EU member states have so far been unable to reach an agreement on plans for an international DST.