We usher in the first year of the ‘Spring Statement’, where the Chancellor of the Exchequer illustrates the state of the economy. There will, however, be no immediate tax changes or spending announcements as during the budget. The budget only occurs once a year moving forward, in the autumn. In this post, we are just going to look at what the Chancellor mentioned, and anything that may be relevant to the technology industry.
The UK Economy
Overall, there was a general optimistic tone. Communicated through the announcement of a slight reduction in inflation and borrowing, with continued growth, which has exceeded the OBR’s gloomy post-brexit referendum forecasts. There is hope yet! However, Mr Hammond did bring this hubris back down to earth with the following: “we are still dealing with the very early drafts of economic history and it’s important not to put too much weight on what are still early indicators of economic activity either side of the Brexit vote.” Now on to the specifics:
In a discussion about technology and tax, Mr Hammond identified there needs to be a deeper dive into looking at how big tech companies are taxed. He outlined that with the big tech companies (namely Facebook and Google) which are based in countries with favourable tax treatments (such as Ireland and Luxembourg) could possibly be stopping tax to fall where it is due. This is because some businesses in the UK who generate all of their income through the platform may not be paying the tax that they are due, through either avoidance or simply not being aware. He summarised this by saying the ambiguity of ‘where digital businesses are taxed and where they create value’ is a liability to ensuring the corporate tax system is sustainable and fair. He is conscious of ensuring that this doesn’t have an influence on innovation in the UK, specifically on start-ups and growing companies. This is fitting, and we feel it is fair. To some degree, it coincides with the recent discussion over the anti-competitive nature of the big tech companies.
It is a possibility that we will soon be rid of 1p and 2p coins, as the Royal Mint has to produce 500 million every year to account for the ones that drop out of circulation every year. An additional factor that is influencing this demonetisation is the increased use of digital payments, as people are able to pay online and in-store through their device or bankcard. This corresponds with the PSD2 (Payment Services Directive) regulations that have come in this year, which allows third parties (pending the user’s approval) to have access to the information in, and make payments directly from the consumer’s bank account. This is going to have a significant effect on how money changes hands in the UK, and it is only going to continue to get digitalised.
Single Use Plastic
As Philip Hammond said, plastic used ‘for only a few seconds can last centuries in the natural environment’. Therefore, it makes sense to implement a tax on the use of them to ensure that producers don’t see the difference in price between using plastic, and a bio-degradable alternative. Points covered include not only the incentive for retailers; however, it also included possible incentives for consumers to recycle existing plastics (rewards for recycling) and most importantly it mentioned the different stages in the supply chain. Imagine a completely plastic-free farm to fork process, which would be brilliant.
Overall, we feel this is a very forward-thinking Spring Statement. We would love to hear your views regarding the above, please don’t hesitate to get in touch!