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Questions for the UK chancellor as France prepares to tax Amazon

MPs want Hammond to stick to tax for online firms announced last year

France is set to tax online giants like Amazon, Google and Facebook three per cent of their online revenue, putting pressure on Westminster to follow suit to save suffering UK town centres.

The French government is forging ahead without EU backing after efforts to introduce such a tax across the board failed last year. Most companies which will be hit by the tax are based in the US, and politicians for countries like Germany and Ireland expressed concerns that policy-makers in the States would retaliate.

The tax will apply to online companies with global revenues of more than 750m euros (£644m) and French revenue over 25m euros (£21m).

The big tech tax is expected to bring an extra 500m euros (£430,000) into the country.

Last year, Chancellor Philip Hammond announced a similar tax initiative for digital companies operating in the UK. He said it would be set at two per cent, worth around £400m a year to the country.

The Tory MP blasted the “painfully slow” discussions between countries on how to tackle online companies’ tax avoidance.

Hammond said: “The UK has been leading attempts to deliver international corporate tax reform for the digital age.

“A new global agreement is the best long-term solution. But … We cannot simply talk forever. So we will now introduce a UK digital services tax.

“It is only right that these global giants, with profitable businesses in the UK, pay their fair share towards supporting our public services.”

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Hammond emphasised that this would not be an online sales tax, as that would have an impact on consumers, but a service tax.

The introduction of such an initiative has not been confirmed, with no new developments since a consultation was launched in November.

Earlier this year, Treasury financial secretary Mel Stride said the government thinks there is a high risk that such a sales-specific online tax would be found to be in breach of state aid rules.

Labour’s deputy leader, Tom Watson, said firms like Apple do need to pay more in tax, but that Hammond’s proposed measure was “pittance” for massive international companies.

In the UK, Amazon pays £63m in business rates on £8bn revenue. Meanwhile, department store Debenhams pays £80m in business rates on revenues of £2.3bn.

Last month experts urged the UK government to level the playing field for UK retailers struggling to keep their high street stores afloat by introducing a tax for big digital firms.

A committee of MPs called for a shake-up in business rates to take the pressure off physical shops.