The UK government is set to phase out a tax on revenues made by the likes of retail giants such as Amazon.
Last year, the UK launched a two per cent digital services tax on online marketplaces, which cost the Treasury £300 million in the 2020/21 financial year.
This was in response to speculations that multinational tech giants making money in the UK were shifting their profits overseas where they could be taxed at lower rates.
But the government said at the time that it would scrap the tax once a global solution was in place.
Under a deal agreed by 136 countries earlier this month, expected to come into force in 2023, the largest and most profitable multinationals will be expected to pay a “fair share” of tax in the markets where they do business and not just where they have their headquarters.
The rules will apply to any firm with a profit margin above 10 per cent.
A quarter of any profit made above that margin will be reallocated and subject to taxes where they operate.
“Following the landmark deal achieved earlier this month, I am delighted we have agreed a way forward on how we transition from our digital services tax to the newly agreed global tax system,” chancellor Rishi Sunak said.
“This agreement means that our digital services tax is protected as we move to 2023, so its revenue can continue to fund vital public services.”