US threatens trade war with Britain over digital tax for US tech giants: Treasury Secretary Steven Mnuchin warns of tariffs on UK car makers after Sajid Javid pledges to target Google and Facebook
- UK government wants to bring in a digital services tax on major tech companies
- But Washington is fiercely opposed to the tax and is insisting it must be dropped
- US Treasury Secretary Steven Mnuchin said Donald Trump will raise it with PM
- Mr Mnuchin also hinted the US could impose retaliatory tariffs on UK goods
- Sajid Javid said today the government is planning to proceed with the plans
Washington today raised the prospect of starting a trade war with the UK if the British government goes ahead with plans to impose a tax on US tech giants.
Mr Javid said the digital services tax will be introduced from April but will only be a temporary measure until an international agreement is in place on how to deal with big online companies like Google and Facebook.
But Mr Mnuchin was clear the White House remains ardently against the move as he hinted retaliatory tariffs could be imposed on the UK’s car industry if the tax is rolled out.
The US and France have announced a truce over President Emmanuel Macron‘s plans to introduce a similar measure after Washington responded with a threat to slap punitive tariffs on products including French cheese and wine.
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 UK users – will be introduced.
Donald Trump, pictured in Davos today, will put pressure on Boris Johnson to ditch plans to impose a tax on tech giants
Sajid Javid today told the World Economic Forum in the Swiss ski resort that the digital services levy will go ahead in April
Speaking at the World Economic Forum in Davos, Switzerland, the Chancellor said: ‘We plan to go ahead with our digital services tax in April.
‘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.
‘It is a tax that is deliberately designed as a temporary tax, it will fall away once there is an international solution.’
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 international approach to succeed.
Asked whether a post-Brexit US-UK trade deal will be possible if Mr Javid presses ahead with the tax, Mr Mnuchin said ‘we will be having some private conversations about that’, adding: ‘I’m sure this will be worked out.’
Appearing alongside Mr Javid on a panel at the Swiss ski resort, Mr Mnuchin said: ‘I’m sure the president and Boris will be speaking on it as well, as the president did with Macron.’
He argued a digital tax is ‘discriminatory in nature’ and the US is participating in the OECD process to find a solution.
‘If people want to just arbitrarily put taxes on our digital companies, we will consider arbitrarily putting taxes on car companies,’ he warned.
The US believes the tax is fundamentally unfair because most of the companies which it would apply to are based in North America.
But Mr Javid said there has been a growing disconnect between where customers of online firms are based and where they are taxed.
US Treasury Secretary warned Mr Javid that imposing the tax would likely result in tariffs on UK car imports being hiked up
Mr Johnson, pictured in Downing Street today, has enjoyed a friendly relationship with Mr Trump since taking office but the digital services tax could sour relations
‘This does require an international solution and that is something I think we all agree on,’ he said.
While there is not an international agreement yet, ‘this could be the year of change’, the Chancellor added.
The prospect of a trade war with the US is likely to spark major concerns in the UK’s manufacturing sector.
Mr Trump has previously not hesitated in taking action against countries he believes are treating the US unfairly on trade.
A dispute with China now appears to be cooling but Mr Trump is still displeased with US relations with the EU.
He said today he believed the bloc would agree to more favourable trading terms because if it did not then he would impose ‘very high tariffs’ on European products.
‘They are going to make a deal because they have to,’ he said. ‘They have to. They have no choice.’