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Moving Houses Of Parliament

Kitty Miv, Editor
26 July, 2019

With the United Kingdom grabbing the headlines this week anyway, with the appointment (one can hardly properly call it an election) of new Prime Minister, Boris Johnson, it probably makes sense to focus on the UK this week, especially with the Scottish authorities recently issuing dire warnings that Johnson may be the last PM to preside over the Kingdom as a United one.

Mid-month, the Government released a summary of the feedback that it had received on its consultation on the new Digital Services Tax and set out amendments to its proposals to ensure the regime functions effectively and as intended.

Plans to introduce the levy were confirmed in the 2019 Budget, and are broadly in line with moves in other countries in this area. The Government has proposed that the tax will apply to revenue generated by search engines, social media platforms, and online marketplaces, to revenues from those activities that are linked to the participation of UK users. It will apply only to groups that generate global revenues from in-scope business activities in excess of GBP500m per year. Businesses will not have to pay tax on their first GBP25 million of UK taxable revenues.

According to the Government, with regard to the rationale for the digital services tax, most responses acknowledged the challenges facing the international tax system, and there was broad support for the ongoing OECD process to seek a consensus-based international solution to the tax challenges arising from digitalization by 2020. On tax design matters, meanwhile, respondents raised a number of issues focusing on the approach to drawing the scope of the DST, the method of defining a UK user, and the design of the safe harbor.

Then later in the month, with regard to property purchases by non-UK residents, the Government announced – ahead of the publication of the 2019-20 Finance Bill – that it would be dropping plans for a new 1% stamp duty land tax on residential property purchases, in a simplification move which has been welcomed by property tax experts.

Continuing on the theme of tax simplification, then, and the UK's Office for Tax Simplification has released its third annual report, setting out progress in its work to support the Government to simplify the UK tax system.

During the year to March 31, 2019, the OTS set out recommendations on tax reform in seven reports, covering a wide range of areas including inheritance tax, HMRC guidance, and the taxation of self-employed people.

In its annual report, the OTS highlighted that reform is necessary in a number of areas, including the distortions caused by the VAT registration threshold, which can discourage taxpayers from taking on extra work that would push them over the VAT threshold and require them to comply with the VAT regime. It also said there needs to be harmonization in the definition of common terms in UK tax law.

It also – perhaps unsurprisingly, given its remit – urged UK policy makers to make fewer changes to tax rules, highlighting in particular how frequently changes have been made to pension tax rules.

"A key way to reduce complexity is to make the framework of a tax easier to understand by a taxpayer, without needing tax training. Reducing and removing distortion also helps. There shouldn't be two ways to achieve a similar result – aside from differences in tax," the report suggested.

And now, if you'll excuse me, it's back to 'Politics Watch 2019', where things are looking likely to be far from simple

About the Author

Kitty Miv, Editor

Kitty was born in Argentina in 1960 to a Scottish cattle rancher and his Argentine wife. Educated in Edinburgh and at Princeton, Kitty worked for the World Bank as an economist, where she met and married an emigre Iranian banker. During her time with the Bank, Kitty worked in a number of emerging markets, including a spell in the ex-USSR as a Transition Economies Team Leader. Kitty is now a consultant in Brussels and has free-lance writing relationships with a number of prominent economic publications. kitty@lowtax.net


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