HMRC failing to scrutinise potential tax avoidance by big tech, watchdog warns
Revenue officials are not paying enough attention to a new tax on big tech firms’ earnings in the UK and are therefore failing to scrutinise potential avoidance, parliament’s spending watchdog has warned.
While the digital services tax brought in a surprise bumper income in its first year, MPs on the cross-party public accounts committee says this suggests HM Revenue and Customs officials had failed to properly understand its impact.
The PAC warns in a report published on Wednesday that British tax authorities are at risk of ignoring whether the levy is designed in the best way because they only intend for it to be temporary.
The tax, which imposes a 2% charge on digital revenue generated in the UK, was introduced in April 2020 as a way to stop the world’s biggest technology companies, including Google, Apple and Amazon, avoiding tax by shifting profits overseas.
The National Audit Office (NAO) found last year that it generated 30% more than expected in its first year of operation – though members of the PAC warned that was not necessarily a good sign.
Sarah Olney, the Liberal Democrat chair of the committee, said: “The fact that the DST generated so much more than HMRC had predicted suggests there is some kind of flaw in their forecasts. If there is a flaw in their forecast, how can we really know whether companies are managing to avoid it?”
She added that the committee was concerned that officials were not doing enough to monitor the implementation of the tax because it is due to be phased out once a global system is introduced. “This is a holding tax,” Olney said. “The risk is that because of that, it is not being reviewed properly and levels of avoidance and evasion are not being properly scrutinised.”
The DST was
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