ICAEW Tax Faculty has responded to the digital services tax (DST) consultation in particular the draft guidance and legislation published by HMRC on 11 July 2019. The response is published at ICAEW REP 87/19 and follows up on the earlier consultation document published on 7 November 2018, to which we responded as ICAEW REP 26/19.
The representation acknowledges the policy objective to address the current corporation tax rules which can lead to a misalignment between the place where profits are taxed and the place where value is created within the digital economy. In particular, we appreciate the need to consider how the allocation of profits between countries could be more linked to the interaction and engagement with a user base. While a multilateral solution would be welcomed, we appreciate the balance between the need to take action now and finding comprehensive global agreement.
However, several concerns are raised in the representation. Notable ones include the broader impact the measure could have on international trade and investment in what are already uncertain times. There is also a concern that smaller digital business (or indeed the end consumer) will simply end up bearing the cost of DST which appears at odds with the policy objective. There was also consistent feedback that the balance between the content of the legislation and the guidance needs to be improved. Members thought that the guidance was seeking to address omissions from the legislation rather than illustrating or explaining terms of the legislation. This has then led to confusion around the scope of the legislation and how key terms are defined.
Any questions around the consultation should be sent directly to firstname.lastname@example.org.