ACCA welcomes the opportunity to provide views in response to HM Treasury on digital services tax (DST).
ACCA has consistently maintained that international coordination on such a global challenge as the digitalisation of businesses is paramount. As such, we believe that it would be preferable, both to ensure stability and to provide much-needed certainty to businesses, to implement tax reforms once a multilateral solution has been agreed at the OECD level.
However, we note the political urgency to address the issue. We recognise HM Treasury's intention to avoid disruption to businesses, by restricting the scope of DST to very large, highly digital businesses.
Introducing DST on a unilateral basis, albeit on a limited scope, leads to greater risks of double taxation and disputes. The risks are all the higher, given that the proposed DST is not a listed tax in the OECD Model Tax Convention (as noted in paragraphs 10.16 – 10.19 of the consultation document), and therefore is unlikely to be governed by the terms of existing bilateral double taxation treaties.
In our view, these risks are not sufficiently addressed in the consultation document. We would urge HM Treasury to carefully consider steps to mitigate the risks of double taxation as a matter of priority. We have set out our specific concerns at the end of this document, in the 'ACCA Comments on Chapter 10' section.
With the rapid pace of technological development, the boundary between digital and traditional business models is becoming increasingly blurred. We would urge HM Treasury to consult widely with businesses – not only those viewed as 'digital' businesses – to fully assess the impact of the DST. Further modelling across the large business community may be needed, to minimise the risk that more groups fall within the scope than the policy intended.