The Chartered Institute of Taxation (CIOT) has warned that the government's planned Digital Services Tax (DST) won't serve as a cure for the UK's 'ailing high streets'.
From April 2020, the DST 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.
Government documentation states that the first £25 million of relevant UK revenues will not be taxable. Small firms will therefore not be within the scope of the tax.
The CIOT suggested that the DST will raise £440 million by 2023/24, and affect mainly large multinational businesses that operate search engines, social media platforms and online marketplaces. The Institute outlined that, as this will be the case, the DST will have a 'wholly different focus' to business rates.
'The DST should not be seen as a panacea for the problems of 'bricks and mortar' high street shops,' said John Cullinane, Tax Policy Director at the CIOT.
'Questions around business rates and the drivers for the DST are very different issues. The DST is about the UK getting what it sees as the right share of international tax on profits, based on value added by users – and not a tax on online sales more generally.'