UK agrees to end digital services tax after global tax reform

Google app is seen on a smartphone in this illustration
Google app is seen on a smartphone in this illustration taken, July 13, 2021. REUTERS/Dado Ruvic/Illustration/File Photo

LONDON, Oct 21 (Reuters) - Britain said on Thursday it would phase out its Digital Services Tax on U.S. tech giants such as Google and Facebook once a global reform to corporate taxation takes effect in 2023, averting the threat of tariffs from the United States.

"We have agreed a way forward on how we transition from our Digital Services Tax to the newly agreed global tax system," finance minister Rishi Sunak said in a statement.

"This agreement means that our Digital Services Tax is protected as we move to 2023, so its revenue can continue to fund vital public services," he added.

Austria, Britain, France, Italy, Spain and the United States reached an agreement on Thursday on the transition from national digital services taxes contested by Washington to a new global tax deal.

The agreement was reached after nearly 140 countries struck a deal earlier this month on new rules for international corporate taxation.

Britain introduced its digital services tax in April 2020, levied at 2% of the gross revenue large digital companies derived from users in the country.

Britain's finance ministry said the Digital Services Tax paid after January 2022 will be credited against future British corporation tax bills if it exceeds the amount payable under new global rules agreed via the OECD.

Reporting by David Milliken and Paul Sandle, editing by Andy Bruce and Hugh Lawson

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