WASHINGTON – Today, global tech trade association ITI cautioned the United Kingdom’s HM Treasury that the introduction of an online sales tax would discourage UK businesses from modernising through digital tools and undermine ongoing multilateral negotiations to address the tax challenges arising from the digitalisation of the global economy. In its comments, ITI urges HM Treasury to forgo its consideration of an online sales tax and instead focus efforts on aligning domestic tax policy with the Organization for Economic Cooperation and Development (OECD)/G20 Inclusive Framework’s outcomes.

“It is very concerning that the United Kingdom is considering development of a new digital tax as negotiators from more than one hundred governments are simultaneously working to finalise reforms to the international tax landscape,” wrote ITI in the comments. “Most if not all businesses have adopted elements of digitalisation to streamline operations, enter new markets, better engage with consumers, or achieve other business objectives. The trend towards omnichannel distribution started prior to the onset of the COVID-19 pandemic and has only accelerated over the past two years: one in three small and medium-sized enterprises (SMEs) reported that they would not have survived the pandemic without digital tools.

“Pursuing an online sales tax would effectively tax business modernisation and transformation, reduce incentives to adopt digital tools as means of strengthening resilience and productivity, and contravene long-standing international tax principles,” ITI continued.“We strongly discourage HM Treasury from further consideration of the online sales tax and instead urge focusing all its efforts to aligning domestic tax policy with the Organisation for Economic Cooperation and Development (OECD)/G20 Inclusive Framework’s outcomes by removing the Digital Services Tax (DST) and forbearing new taxes aimed at ring-fencing the digital economy.”

The October 2021 Statement on a Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy notably included a commitment to provide for the withdrawal of relevant unilateral measures and to refrain from the introduction of new ones. ITI’s comments underscore industry’s concerns that a further unilateral move by the UK would be emulated in other jurisdictions and lead to a new wave of unilateral, overlapping, gross-based taxes.

Read the submission here.

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