US threatens 25% tariffs on UK exports in row over Britain’s ‘unreasonable’ tech firm tax

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The US is threatening to impose tariffs of up to 25 per cent on some UK exports as it retaliates over Britain’s new ‘unreasonable’ and ‘discriminatory’ tax on big tech firms.

The UK introduced a digital services tax last April in a bid to ensure search engines, social media platforms and online marketplaces pay their fair share.

But Washington believes the tax unfairly targets US firms and it is now pressing ahead with counter-measures as it applies the pressure to Number 10 to change course.

The increased tariffs on UK exports could be imposed on items like make-up, coats, dresses, shirts, ceramics, gold necklaces, air conditioning machines, furniture and game consoles.

The US is threatening to impose tariffs of up to 25 per cent on some UK exports as it retaliates over Britain’s new ‘unreasonable’ and ‘discriminatory’ tax on big tech firms

The UK’s digital services tax, first unveiled back in October 2018 by then-chancellor Philip Hammond, applies a two per cent levy on the revenues of big tech firms.

The tax applies to companies with worldwide digital services revenues of more than £500million and UK digital services revenues of more than £25million.

Downing Street has promised the tax will be scrapped once a global solution has been hammered out to ensure tech firms pay proportionate amounts of tax where they operate.

The US had urged the UK not to go ahead with the measure but Number 10 proceeded anyway.

The Office of the US Trade Representative launched an investigation last June to establish whether the policy discriminated against US companies and to determine whether the tax was ‘unreasonable’.

In January this year it concluded that the digital services tax ‘is unreasonable or discriminatory and burdens or restricts US commerce, and therefore is actionable’.

The US has vowed to take ‘all appropriate and feasible action’, with the US Trade Act allowing for the imposition of retaliatory tariffs.

Setting out a potential course of action, the Office of the US Trade Representative said it ‘proposes to impose additional tariffs of up to 25 percent ad valorem on an aggregate level of trade’.

The US believes the digital services tax will see US-based companies paying the UK approximately $325million per year and the tariff measures are designed to generate a similar amount.

The US has drawn up a long list of products which could be hit with the increased tariffs. The initial investigation into the tax was launched under Donald Trump’s White House and Joe Biden’s administration has decided to continue with it.
The proposed way forward will now be subject to consultation in the US.

A UK government spokesman told the BBC: ‘Like many countries around the world, we want to make sure tech firms pay their fair share of tax. Our digital services tax (DST) is reasonable, proportionate and non-discriminatory.

‘It’s also temporary. We’re working positively with the US and other international partners to find a global solution to this problem and will remove the DST when that is in place.’

Business Matters Magazine

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