PHILIP HAMMOND slapped a £440million a year tax on the world’s biggest tech giants yesterday in a Halloween attack on the “FAANGS”.

The Chancellor said it wasn’t fair that companies such as Facebook were making so much in the UK but paying so little to the Treasury.

The so-called ‘Faangs’ – Facebook, Amazon, Apple, Netflix and Google – taxed two per cent on the revenue they make from advertising and online marketplaces from April 2020.

Critics said it defied belief that the UK had set its rate at two per cent rather than the three per cent mooted by the European Union.

Spain earlier this month proposed a three per cent rate when unveiling its own proposals to get tough with web companies and streaming services.

The actual taxable revenue will also be based on ‘self-assessment’ by the companies.

But the Chancellor insisted Britain was leading the way by moving now.

Sources claimed an EU-wide tax was unlikely because Germany is fiercely opposed to the move.

Speaking in the Commons Mr Hammond said: “Digital platforms pose a real challenge for the
sustainability and fairness of our tax system.

“The rules have simply not kept pace with changing business models.

“And it’s clearly not sustainable, or fair, that digital platform businesses can generate substantial value in the UK without paying tax here in respect of that business.”

He added: “A new global agreement is the best long-term solution, but progress is painful slow. We cannot simply talk forever so we will now introduce a UK Digital Services Tax.”

Aides admitted the UK was “treading softly” to start with but was “committed to action”.

The move came as the Chancellor separately raided big business in general by taking away the employment allowance from all-but small firms to raise £320 million. Entrepreneur’s relief will also be modified to limit the scope for tax avoidance.

The Treasury’s independent forecasters estimate that only around 20 tech giants at most will be hit by the Digital Services Tax.

It will only cover web firms generating more than £500 million a year in global revenue – so as to spare tech start-ups and growing businesses.

Mr Hammond made clear he didn’t want to introduce a general online sales tax on companies flogging goods directly to the public over the web.

The ‘Digital Services Tax’ will instead focus on taxing the money made by the likes of Facebook from advertising to UK customers using a search engine or selling to another user via on “online marketplace”.

The Chancellor unveiled his intention to get tough with web giants at Tory party conference earlier this month.

Within days, Facebook was branded “immoral” after it revealed it had paid just £7.4 million in tax in the UK last year despite sales of more than £1.2 billion.

The company declined to comment yesterday before seeing the detail.

Internet giants have sparked outrage by channelling sales via countries such as Ireland and Luxembourg which have light-touch tax regimes.

Business chiefs urged the Chancellor the new tax was “high risk”.

CBI director general Carolyn Fairbairn said: “The Government should move in step internationally, leading multilateral solutions, or risk losing our global competitive edge in digital.”

But Labour deputy leader and Shadow Culture Secretary Tom Watson said the raid was generating a “pittance”. He stormed: “The new tax isn’t even set to be implemented until 2020 at which time the tech giants will start to enjoy a 2 per cent cut in their corporation tax rate. The lack of ambition in this announcement is just derisory.”

Spain’s Finance Ministry unveiled its plans for a Digital Services Tax earlier this month – saying it wanted to also include giants such as Uber and Airbnb.

Facebook Spain reported losses of £890,000 recently.

Finance Minister Maria Jesus Montero stormed: “There are businesses we all know that are dedicated to services and are generating billions in economic activity, yet do not pay appropriate taxes.”