DEBATE: Should tech firms be taxed on revenues, rather than profit?
Should tech firms be taxed on revenues, rather than profit?
Sir Vince Cable, leader of the Liberal Democrats and former secretary of state for business, innovation and skills, says YES.
When it comes to tax avoidance by large multinational companies, we have reached what can only be described as an unsustainable situation.
These large, mainly technology focused firms have been cheerfully manipulating where their profit is booked to pay minimal tax in the UK for many, many years now.
The Treasury is looking at a new tax that would be levied on these firms’ revenue, rather than profit, which is an extremely robust step – but probably one that is necessary in the current environment.
A revenue-based system of taxing these firms could be used, in the short term, as a rough proxy for their economic activity and act as a strong disincentive to tax dodging in our country.
However, this is something of a stop-gap measure. In the long run, we need a proper international agreement to create a more suitable taxation arrangement that properly captures the amount of tax firms should be paying and where they should be paying it.
Russ Shaw, founder of Tech London Advocates and Global Tech Advocates, says NO.
There is no doubt that the biggest multinational tech firms have a responsibility to contribute a fair and adequate level of tax to support the UK’s public sector. Britain’s infrastructure is a pillar of the tech ecosystem which has helped these businesses to flourish.
But officials have to recognise the positive contribution tech giants make to the thriving technology sector and critically in supporting the UK’s startups and scaleups. Just last week, Microsoft announced that it will be investing £14m and opening a new startup accelerator in the heart of east London.
In recent years, investments in tech have reached record levels, and employment in the industry has expanded rapidly. It is therefore an imperative that we ensure the UK remains an attractive destination for large investment. We must protect the digital economy by signposting the UK as being open for business and ensure that our tax policies encourage growth at a time where other European cities are gaining in appeal.
We cannot threaten prosperity by deterring world-leading tech firms.