Donald Trump’s administration has warned Britain will not get a free trade deal with the US unless the government reconsiders taxes on US tech giants. US officials have demanded that an incoming tax on global businesses generating at least £500 million a year is scrapped due to the impact it will have on US companies. The digital services tax, announced in the October 2018 budget by former chancellor Phillip Hammond, will target tech giants such as Amazon, Google, Facebook and Twitter when it comes into force next April. The tax will be written into law in this year’s Autumn budget and will add a 2% tax on profits made by specific types of digital business. It explicitly targets search engines, social media platforms and online marketplaces as the government says current international regulation is lacking for these new types of business. The tax will not apply to online sales of goods, advertising revenue or the collection of data. However, it will apply to the provision of digital advertising where the platform makes money from targeting UK users. Announcing the proposals last year, Mr Hammond said: ‘It is only right that these global giants with profitable businesses in the UK pay their fair share.’ Treasury figures estimate the tax will bring in £1.5 billion for the UK over the next four years and has described the tax as ‘narrowly-targeted, proportionate and ultimately temporary, pending a comprehensive global solution’. However senior White House sources have hit back at the proposals, warning the government’at multiple levels’ that the tax would seriously impact the UK’s ability to reach a trade deal. A White House source said: ‘The message was, “if you go ahead and introduce this tax, we will not begin free trade negotiations with you”.’ The UK is currently negotiating its own trade deals because if Britain leaves the European Union without a deal in October, the country will lose access to trade with around 70 countries. This would account for about 11% of the UK’s total trade. This dispute comes a week after the US President began work on a deal between the UK and US with Boris Johnson just days after he stepped into Number 10. Mr Trump has directly hit back at similar proposals in France which would add a 3% tax on tech giants, threatening to retaliate by placing strict tariffs on the import of French wine. Last week the US President tweeted: ‘France just put a digital tax on our great American technology companies. ‘If anybody taxes them, it should be their home Country, the USA. We will announce a substantial reciprocal action on Macron’s foolishness shortly. I’ve always said American wine is better than French wine!’ White House spokesperson Judd Deere confirmed Mr Trump’s view on Friday, telling reporters: ‘The Trump Administration has consistently stated that it will not sit idly by and tolerate discrimination against U.S.-based firms.’
The US will not begin free trade negotiations with the UK if the digital services tax, set to come into law in the next four years, is not scrapped, according to senior White House sources. The 2% levy on profits is aimed at US tech giants, including Amazon, Google, Facebook and Twitter, potentially generating an estimated £1.5bn ($1.8bn) over April 2020 for the UK Treasury. US President Donald Trump threatened tariffs against France after it agreed to a similar 3% tax on digital firms.