Javid in tech tax war with U.S.
As he vows to tackle net giants despite pressure...
SAJID Javid yesterday vowed to press ahead with a new tax on tech giants, despite warnings it could spark a trade war with the United States.
In an extraordinary intervention, US treasury secretary Steven Mnuchin threatened to slap tariffs on British car exports if the Government goes ahead with a new ‘digital services tax’ in April.
But Downing Street warned that any trade war would backfire – and said the ‘targeted and proportionate’ new tax would go ahead.
Speaking alongside Mr Javid at the gathering of the world’s business elite in Davos, Mr Mnuchin expressed ‘disappointment’ that the UK appeared to be prioritising a trade deal with the EU.
The Chancellor confirmed that the UK’s ‘first priority’ was a deal with the EU – although No 10 later stressed that the two sets of trade talks could be conducted in parallel. The tax row risks sparking a fresh rift with the US, which is already warning of reprisals if the Government allows Chinese firm Huawei a role in the UK’s 5G network. The digital services tax would put a 2 per cent levy on the UK sales of technology giants, such as Google, Amazon and Facebook and is forecast to raise about £500 million a year.
Mr Javid said: ‘We plan to go ahead with our digital services tax in April. It’s a proportionate tax and it is deliberately designed as a temporary tax, so it will fall away once there is an international solution.’
Ministers say the move will help address concerns about the lack of tax paid by some US-based technology giants. But the US, which is resisting plans for an international solution, has accused the UK of targeting American corporations.
Mr Mnuchin said: ‘We think the digital services tax is discriminatory in nature. If people want to arbitrarily put taxes on our digital companies, we’ll consider arbitrarily putting taxes on car companies.’
Earlier this week, France shelved plans for a similar tax on tech giants following pressure from the US. Mr Mnuchin warned that Donald Trump was likely to take up the issue directly with Boris Johnson. But Downing Street warned that any attempt to start a trade war would be counterproductive.
The PM’s spokesman said the UK’s ‘strong preference’ was to secure an international agreement, but warned that a global deal was taking ‘too long’. The Organisation for Economic Cooperation and Development, which has been trying to broker an international deal, also warned the UK not go ahead with the tax, saying individual countries going their own way would lead to a ‘cacophony’.
But a Government source said it was the OECD’s failure to find a solution that had forced the UK to go it alone.
Brexit will be marked by a set of stamps in January next year after Mr Johnson made the request to Royal Mail. The company’s bosses originally rejected the idea, arguing it would breach ‘strict political neutrality’.