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By Paul Hannon 

LONDON -- The U.K. will introduce a new tax that targets large technology companies, starting in 2020, treasury chief Philip Hammond said Monday, setting the country on a path to become the first developed economy to do so.

The announcement comes as dozens of countries are contemplating new levies on digital services sold by companies such as Alphabet Inc. and Facebook Inc. from units based beyond their borders as economic activity shifts online.

"It's clearly not sustainable, or fair, that digital platform businesses can generate substantial value in the U.K. without paying tax here in respect of that business," Mr. Hammond told lawmakers during his presentation of the annual budget.

He said the tax will only be applied where the "business lines in scope" generate at least GBP500 million a year in global revenues, and it is expected to raise GBP400 million annually.

The U.K. first set out its justification for a new tax in November 2017, arguing users of digital services help make the product that tech companies sell to advertisers and other customers. That principle has influenced the rest of the European Union, which is working on its own tax proposal.

Since launching an effort to overhaul the system for taxing companies that operate internationally in 2013, developed-country governments have been divided on whether to introduce new levies that specifically target digital companies or to treat digitization of the economy as a process that requires a more broad-based response. The Organization for Economic Cooperation and Development, which oversees international tax negotiations, hopes a compromise can be found by 2020.

Mr. Hammond said that while a global agreement "is the best long-term solution," progress has been "painfully slow."

"We cannot simply talk forever," he said.

Write to Paul Hannon at paul.hannon@wsj.com

(END) Dow Jones Newswires

October 29, 2018 13:07 ET (17:07 GMT)

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