British Chancellor Philip Hammond wants tech giants to pay up through a new digital services tax.
On Wednesday, Hammond announced his yearly tax and spending plan in a speech that heralded an end to eight years of austerity in Britain. As part of that overarching message, Hammond said that the U.K. is prepared to levy a digital services tax aimed at the likes of multinational giants like Amazon (AMZN) - Get Report and Alphabet (GOOGL) - Get Report and Facebook (FB) - Get Report .
"We will now introduce a U.K. digital services tax," he said. "This will be a narrowly targeted tax on the U.K.-generated revenues of specific digital platform business models. It will be carefully designed to ensure it is established tech giants, rather than our tech startups, that shoulder the burden of this new tax."
Hammond stressed that it would not be an online sales tax, but rather a tax on profitable companies that generate at least 500 million pounds per year "in global revenues on the business lines in scope." The Chancellor's office plans to consult on the details, but he said it will come into effect in April 2020 and generate at least 400 million pounds per year.
Separately, the U.K. is working with intergovernmental groups The Organisation for Economic Co-operation and Development (OECD) and Group of Twenty (G20) on a similar initiative. Drummond said that should a solution with these groups materialize, the U.K. will consider that version in place of the U.K.'s digital services tax.
The U.K. digital services tax could wind up failing, with the specter of a Brexit deal looming over the budget proposal. Should a deal fail, that would likely require a drastic revision of the budget. A split in the country's leadership over Brexit could trigger a collapse in Britain's government, led by Theresa May, before the end of the year.
Nonetheless, Drummond hoped to send a message that Britain is serious about compelling highly profitable tech giants to "pay their fair share towards supporting our public services."
"This step shows we are serious about this reform," he said.
Alphabet shares were down 2.1% to $1,061.42, Facebook shares were down 0.7% to $144.36 and Amazon shares were down 4.3% to $1,571.83 on Monday afternoon.
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