Chancellor pledges to push ahead with digital sales tax
Sajid Javid has vowed to press ahead with a tax on tech giants in defiance of the White House, igniting a major row that puts US trade talks in jeopardy.
The Chancellor is under mounting international pressure to abandon the tax after a united front from America, France and global organisations left Britain isolated.
White House treasury secretary Steven Mnuchin warned that America would target the UK’s embattled car industry if the country presses ahead with a sales tax on digital firms intended to punish their efforts to legally minimise bills.
It came as France suspended its own plans for a digital tax after a deal with America, and the OECD group of advanced economies said a global solution must be found instead of individual countries taking their own measures.
Javid faced a barrage of criticism at the World Economic Forum in Davos for standing by the tax – which will target the likes of Facebook and Google and is due to be introduced in April – with Mnuchin calling the UK’s plans ‘‘discriminatory’’. In a tense panel discussion with the Chancellor, Mnuchin said: ‘‘If people want to just arbitrarily put taxes on our digital companies, then we’ll consider arbitrarily putting taxes on car companies.’’
He added there will be private discussions with Britain aimed at solving the impasse.
The OECD also urged the UK to ‘‘hold fire’’ on the proposal, which would impose a 2pc tax on digital revenues earned by companies with more than ??500m of global turnover.
Meanwhile Kristalina Georgieva, managing director of the International Monetary Fund, said she preferred such taxes to be introduced at an international level.
But Javid stood his ground, insisting the tax is needed to tackle a ‘‘growing disconnect’’ between where international tech firms have customers and where they book their profits. Firms have been accused of shifting their earnings to tax havens, legally gaming the system.
He said: ‘‘We plan to go ahead with our digital services tax in April.’’ The Chancellor was later backed by Downing Street. Prime Minister Boris Johnson’s spokesman said: ‘‘It is taking 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. The tax will be repealed once a global solution is in place.’’
The row could prove an early stumbling block in talks for a post-Brexit trade deal between the UK and US, and is likely to overshadow the Chancellor’s speech to top British bosses in Davos today. Mr Javid is expected to tell the Confederation of British Industry’s Business Lunch that Britain is starting a ‘‘new chapter’’ after Brexit.
France had also outlined a tax to hit tech giants but suspended the proposal after striking a deal with the US. After meeting with Mnuchin, finance minister Bruno Le Maire said France and the US have agreed on a ‘‘shared global framework’’ for digital taxation.
– Telegraph Group