Bill Dodwell, partner and head of tax policy at Deloitte, considers other countries methods of ensuring that online platforms and their users pay the correct amount of tax, after the Chancellor’s Spring Statement explored ways that these online platforms can encourage tax compliance
One of the most important parts of the UK tax system was designed during the Second World War: the Pay As You Earn (PAYE) system. The growth in incomes and income taxes during the war meant that the Inland Revenue thought it needed a new way to ensure that income tax was paid.
Prior to the war about 10% of individuals paid income tax, but this rose to over 30% towards the end of the war. Individual assessments were no longer effective – so the idea that employers should manage the tax system for the Inland Revenue sounded appealing. Under PAYE, employers deduct tax, pay it to the tax authority and make suitable reports.
Seventy-five years later there may be a new approach to deducting tax and making suitable reports. The Spring Statement launched a call for evidence on ‘the role of online platforms in ensuring tax compliance by their users’. Online platforms are facilitating new economic interactions, increasing market efficiency, lowering prices and providing more choice for suppliers and consumers. The interesting question is whether and how platforms can help their users comply with any tax obligations.
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