United Kingdom gov introduces Digital Services Tax aimed at Amazon, Facebook and Google

Devin Lawrence
October 31, 2018

The IFS director described other tax changes introduced by the Chancellor - including a digital service tax on online giants and a cut in business rates for small retailers - as "a short-term sticking plaster solution to some big underlying problems with the tax system".

"It was not a budget for a student", he said.

While the NHS in England is set to enjoy £20.5 billion higher spending by 2023/24, budgets for most other departments will be "essentially flat" over the coming five years once inflation is taken into account - and will actually fall in per capita terms.

At the moment in the rest of the United Kingdom, the 40p higher income tax rate applies to earnings above the threshold of £46,351 - with this to increase to £50,000 at the start of the next financial year in April 2019.

He said: "We are not going to oppose it on the basis it will put more money in people's pockets".

"It is clearly not sustainable or fair that digital platform businesses can generate substantial value in the United Kingdom without paying tax here", Hammond said.

It said: "The National Insurance contributions Upper Profits and Upper Earnings Limits are aligned to the higher rate threshold and will therefore also increase in 2019 to 2020".

An additional £1 billion was announced for the Ministry of Defence for the remainder of the year, and Hammond specifically referred to cyber capabilities and the sea deterrent Dreadnought programme.

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As the United Kingdom continues negotiations with the EU, Mr Hammond revealed he has increased the amount allocated for Brexit preparations to £2 billion for 2019/20.

The SNP's Westminster economy spokeswoman Kirsty Blackman said the warnings showed why the government must "ditch their reckless plans for an extreme Brexit, which would cause decades of damage to the economy, jobs and living standards".

This lost output will not be recovered before year-end according to the OBR although the independent body does project the economy will then pickup once into the 2019 year with GDP growth rising by 1.6%. Such contracts have been slammed by the Public Accounts Committee for being inflexible, and the Office for Budget Responsibility has identified private finance initiatives as a fiscal risk to the government.

- Debt peaked in 2016/17 at 85.2% of GDP and then falls in every year of the forecast from 83.7% this year; to 74.1% in 2023/24, allowing the Government to meet its target to get debt falling three years early. The one-off capital payment would average £10,000 per primary school and £50,000 per secondary school, he said.

However, it added that this improvement had been swallowed up by the extra spending promised for the NHS by the prime minister in June.

"And far from people's hard work and sacrifices having paid off, as the Chancellor claims, this Government has frittered it away in ideological tax cuts to the richest in our society".

A £420 million fund will help local highway authorities fix potholes and carry out other maintenance tasks.

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