Published: Wed, January 22, 2020
Markets | By Otis Pena

U.S. threatens retaliatory levies if United Kingdom presses ahead with digital tax

U.S. threatens retaliatory levies if United Kingdom presses ahead with digital tax

Prime Minister Boris Johnson's spokesman told the i newspaper: "We've not even started negotiations with the European Union on our future relationship yet, but we're clear that we want a Canada-style free-trade agreement".

We plan to go ahead with our digital services tax in April.

Tim Wach, managing director of Taxand, said: 'The looming threat of trade wars between the U.S. and the United Kingdom over digital tax proposals, evidences just some of the significant problems that result from the individual countries acting on their own and without worldwide consensus.

According to US Treasury Secretary Steven Mnuchin, the latest trade deals with China and neighboring Mexico and Canada will boost US growth this year.

"As related to phase 2, I would say there is no deadline", Mnuchin said at the World Economic Forum on Wednesday.

The comments from Mr Javid and Mr Mnuchin came during a panel discussion at the annual gathering of business and government representatives in Switzerland.

Italy has already introduced a digital levy on tech companies and Austria plans to follow suit this month but France has suspended its plans, pending negotiations between President Emmanuel Macron and Donald Trump.

France will not levy their tech tax until the end of the year to allow time for a multilateral coordinated agreement on tax reform to be agreed.

Mr Javid described the new tax as "proportionate".

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At the World Economic Forum in Davos, Javid said: "We plan to continue with our digital services tax in April".

Le Maire insisted: "Digital companies will pay their fair tax in 2020".

"It will be a very courageous British government that walks into a trade war with the United States at the very moment when centrepiece of its economic policy is to strike a trade deal with the United States", he told the Today Programme.

Several European countries have been infuriated by the huge profits made by global internet giants like Google, Amazon and Facebook who avoid paying tax in many jurisdictions.

The French measure is an attempt to get around tax avoidance measures by multinationals, which pay most of their taxes in the European Union country they are based in - often at very low rates.

But Mr Javid said the tax - a two per cent levy on the revenues of search engines, social media platforms and online marketplaces which derive value from United Kingdom users - will be introduced.

The UK has been urged to hold back on pressing ahead with the levy by the Organisation for Economic Co-operation and Development (OECD), which called for time to allow the push for an global approach to succeed.

Secretary General Angel Gurria told the BBC that without that there would be a "cacophony and a mess" of 40 countries going their own way with "tensions rising all over the place".

The threat of imposing tariffs on UK vehicle manufacturers comes at a critical moment in UK-US relations, as PM Boris Johnson's government looks to strike favorable post-Brexit trade deals with a number of countries around the world.

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