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Internet giants could be hit with turnover tax in the Budget

Today Programme

BBC Radio 4

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Looking ahead to the Budget, will we see some kind of digital tax?

Dan Neidle, partner at the City law firm Clifford Chance, tells the Today Programme that it looks like the Treasury is considering a turnover tax.

He says: "For about a year now the Treasury has been mulling over ways to tax internet companies. The fundamental problem they have is the international tax system basically taxes where value is created. They measure that by where the key employees are.

"When it comes to Facebook, they have a few people in the UK but it’s really about the US, so there’s not much tax the UK can get. The Treasury thinks that’s wrong."

Mr Neidle points out that the Treasury proposed in a paper published in March that you should look at the turnover of the business you’re taxing and then link it to the number of users in each country.

"But the problem with a turnover tax is it’s anti-competitive," warns Mr Neidle.