Brown told to ponder ebusiness tax question

Conservative party financial spokesman David Lidington said the Treasury would have to move on from the days of taxing tangible goods made in fixed locations.

He said risks to revenue could arise from trade in intangible digital products and services, with the problem being of establishing whether a transaction had taken place and, if so, where and when it had occured.

A further threat to corporation tax revenues could come from the mobility of virtual businesses in terms of real spacial location, if and when they start declaring substantial taxable profits, Lidington warned.

He adding: ‘One is not at a stage of panic, but there are some very interesting and important questions to be raised.’

The Aylesbury MP spoke out after receiving replies to a series of questions he raised in the Commons.

Ministers claimed the impact of e-commerce on corporate residence poses no immediate short-term threat to tax revenues.

Paymaster general Dawn Primarolo admitted, however, that UK authorities are engaged in discussions with the Organisation for Economic Co-operation and Development and business ‘on this and related e-commerce issues’.

Lidington also asked if digitisation itself posed a risk to future revenue. Earlier Treasury financial secretary Paul Boateng said Customs did not believe it did.

The Chancellor has already had to change taxation on betting to halt a growing loss of revenue as firms moved offshore to avoid paying it.

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