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White House threatens ‘arbitrary’ tariffs over UK tech tax

Image credit: DT

US President Donald Trump is poised to threaten the UK with retaliatory tariffs as the new Conservative government proceeds with plans to introduce a two per cent levy on the revenue of tech giants.

Speaking at the World Economic Forum in Davos, Switzerland, UK chancellor Sajid Javid confirmed the governments’ plans to proceed with implementing a tax on the largest digital companies.

“We plan to go ahead with our digital services tax in April", Javid said. "It’s important, as we said at the time when we first introduced it to Parliament and legislated for it, it is a proportionate tax.”

The tax was first proposed by former chancellor Philip Hammond and could begin by raising almost £500m a year. The planned two per cent levy will be applied to the revenues of internet companies generating at least £500m a year in global revenue - beginning in the 2020-21 tax year - and only applies to revenue generated from UK users. The tax has many similarities with a three per cent tax introduced in France on the revenue of tech giants operating in France, although the country has agreed to suspend payments for this tax year.

The Trump administration has made its opposition to the European levies clear. Senior White House figures threatened to impose heavy duties of up to 100 per cent on French products such as champagne and luxury handbags, amounting to approximately $2.4bn a year, and are now threatening retaliatory duties on UK manufactured goods, such as cars.

Also speaking at the World Economic Forum, US treasury secretary Steven Mnuchin said that President Trump would discuss the issue with UK Prime Minister Boris Johnson in private – in a conversation that will also touch on a potential US-UK trade deal – and warned that the “discriminatory” levy would result in retribution.

“International tax issues are very complicated and take a long time to look at. If people want to just arbitrarily put taxes on our digital companies, we’ll consider arbitrarily putting taxes on car companies,” he said.

Javid said that the tax has been designed as temporary and will be rescinded once there is an international solution, with an international agreement through the OECD being the preferred solution. OECD Secretary General Angel Gurria told the BBC that it was important to find a global solution to prevent a “cacophony and a mess” of 40 countries taking their own paths on the issue.

A spokesperson for Downing Street commented: “Our strong preference is for an appropriate global solution. It has taken too long to address this issue at international level and so we will continue to introduce our digital services tax in April in the absence of a global solution.”

Meanwhile, another former chancellor, George Osborne, has suggested that the government may follow France and choose to delay the introduction of the levy. Osborne told BBC Radio 4’s Today programme: “It would certainly be a very brave British government that walks into a trade war with the US at the very moment as the centre point of its economic policy is to strike a trade deal with the US. I suspect they will use what the OECD is saying as a reason to delay implementation.”

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