Mr Hammond said the new system is "carefully created to ensure that it is established tech giants, rather than our tech start-ups, that shoulder the burden". "The digital tax represents a revolutionary change - it taxes digital companies, regardless of their legal structure, if they have users in the UK".
The head of Britain's treasury has proposed a new tax targeting tech giants such as Google, Facebook and Amazon.com, in what he described as a necessary evolution of the corporate tax system in the digital age.
Before the budget, it warned that tax rates would need to rise to their highest since just after World War Two if Hammond were to end real-terms cuts on public services spending and significantly reduce public debt as a share of national income. Only profitable companies that pull in at least 500 million pounds in global revenue on their business lines would be required to pay, he said.
Many other jurisdictions including Australia, Singapore, Taiwan and New Zealand, have already announced or implemented taxes on imported digital services.
There is considerable unease in the United Kingdom with regard to tech giants and the feeling that they do not pay enough taxes. We promised to do so and we have done it.' Experts had feared Mr Hammond would be forced to renege on his promise to increase income tax thresholds in a bid to cover the cost of the £20billion funding pledge to the NHS.
Will It Affect Me When I'm Buying Goods Online?
The Finance Secretary said the "overall impact of Tory tax and benefit policies will once again help the rich at the expense of the poor", adding the poorest fifth of households will be £400 a year worse off by 2023/24 while the richest fifth are set to gain £390 a year.
Tech companies however have defended their tax structures, and insist they abide by tax laws as they're now written.
"The measure will also include a safe harbour provision that will allow businesses with very low profit margins to make an alternative calculation of their tax liability", the OBR document points out, although the details of this alternative calculation are not clear at this moment.