The UK finance minister (Chancellor of the Exchequer) Philip Hammond presented the Autumn budget to Parliament on Monday 29 October 2018. Industry commentary relevant to fintech included giveaways for the UK’s industrial and tech budget, and a tax on bigtech firms.
Schroders senior European economist, Azad Zangana said in a statement: “In terms of the policies changes, key announcements included…A new revenues-based tax on internet giants is expected to raise £400 million a year. Moving ahead to introduce this tax before an international agreement is in place could be seen as targeting specific companies from certain countries, and could risk a backlash…Additional funds for the government’s industrial and technology strategy…”
Ritam Gandhi, founder and director of Studio Graphene, a design and development studio specializing in IoT technologies and app development, said in a statement: “The focus on technology was promising to see, including a £1.6 billion commitment of new investments to support the modern industrial strategy. However, there was no further update on the Chancellor’s proposed reforms to the EIS (Enterprise Investment Scheme) fund structure to encourage investment into early-stage firms deemed highly innovative – something touted in the Spring Statement.
“The Government is right to promote reforms that benefit tech startups. The country has become globally renowned for this thriving tech sector, but we must not become complacent – rather than assuming we will remain a leader in tech innovations and digital disruptions, the Government must be willing to intervene and provide a helping hand to those young companies struggling to scale-up. Approximately 50% of startups fail within their first three years, so more must be done to help nurture and support young businesses.”
“With Brexit now on the horizon, the Government cannot assume that tech startups will continue to flourish. More policies, investment incentives and infrastructure improvements are needed so startups are able to progress to become mid-size enterprises and beyond.”
Chris Smith, head of Kajima Community added: “Any attempt to ensure some of the large tech companies pay their fair share of tax is welcome, particularly given the Chancellor has protected small technology businesses by setting a worldwide revenue threshold of £700mn (USD$897.2mn), in line with European Union (EU) proposals.
“It is unlikely that the likes of Amazon or Google will be able to avoid this tax reform particularly as the UK is likely to have the cooperation of Brussels. This is hugely important as any attempt to equalize tax paid by technology firms without this threshold could have led to the UK’s smaller tech firms shouldering the burden of this taxation.
“Ultimately, it is right that those that make money in the UK pay their fair share of tax the only question mark over this is whether a tax of 1% on UK revenues will be enough, especially given the EU is proposing a 3% on revenue. But on the basis that often the lower the tax the less companies are inclined to employ tax advisers to try and avoid paying, it’s probably best that the Chancellor retains this level and sees what tax take he succeeds in securing before considering any further measures.”