The Chancellor of the Exchequer Philip Hammond yesterday used the new UK budget to announce a new “digital services tax” to target the revenues of tech giants.

From April 2020, there will be a two percent tax on the revenue of “certain digital businesses” to ensure that the amount of tax they pay in the United Kingdom is in accordance with the value they get from users in the UK.

Hammond said that while online marketplaces have changed society mostly for the better, they also “pose a real challenge for the sustainability and fairness of our tax system.”

While the budget doesn’t mention any companies by name, it references “search engines, social media platforms and online marketplaces.” So Alphabet (née Google), Microsoft (for Bing), Facebook, and Amazon, then.

Revenue from those companies won't have to pay profit on the first £25 million they make per year, and will try to avoid smaller tech companies by only applying to businesses that generate global revenues greater than £500 million per year.

Hammond went on to say that “it is only right that these global giants, with profitable businesses in the UK, pay their fair share towards supporting our public services”.

He also quipped that he was already “looking forward to my call from the former Leader of the Liberal Democrats,” as Nick Clegg was recently appointed as the head of global affairs and communications at Facebook.

The budget also includes a “safe harbour provision” to protect companies with low profit margins but that clause, and the way that the tax will actually be utilised, will become more clear after the government’s consultation starts in the next few weeks.

Hammond emphasised that this was “not an online-sales tax on goods ordered over the internet [as] such a tax would fall on consumers of those goods,” so hopefully people buying products from Amazon won’t see prices increase. The tax is expected to raise over £400m a year.

The budget also promises £1.6bn to support the government’s investment in AI, digital manufacturing, nuclear fusion and quantum computing. £50 million will be put into new Turing AI Fellowships “to bring the best global researchers in AI to the UK”, and another £100 million in an international fellowship scheme. These actions will, according to Hammond, make Britain “one of the great winners of the technological revolution.”