Sajid Javid defies US trade war threat as he vows to push ahead with digital services tax
Sajid Javid has defied warnings from the US over the introduction of a digital tax on tech giants as he vowed to push ahead with the plans.
America has warned that it will impose tariffs on UK car manufacturers unless the Government ditches the plan.
France has already agreed to delay their plans to introduce its own digital services tax on the likes of Facebook and Google after Washington threatened to introduce a levy against the French cheese and champagne sectors.
But speaking during a panel discussion at the World Economic Forum in Davos, the Chancellor said the Government was committed to rolling out its plans in April in a bid to boost UK tax-take from the global firms.
“I think everyone agrees the pace of change in the last ten or twenty years has been unprecedented and there has been, therefore, a sort of disconnect between where the customers are based for these businesses and where the profits are generated,” he told the gathering.
The proposals will see digital firms hit with a 2% levy on revenues made from UK consumers, but the Chancellor said the plans had been designed to “fall away” once an international agreement had been brokered.
“We plan to go ahead with our digital services tax in April. It is important, as we said at the time... when we first legislated for it, that it is a proportionate tax,” he added.
“It is a tax that is deliberately designed as a temporary tax so it will fall away when there is an international solution.”
But his comments provoked criticism from US Treasury Secretary Steve Mnuchin, who joined Mr Javid on the panel, saying the proposals were “discriminatory” against American companies.
“I think we have been pretty clear that we think the digital tax is discriminatory in nature,” he said.
“There is an OECD process that we are participating in.
“International tax issues are very complicated, they take a long time to look at, and if people want to just arbitrarily put taxes on our digital industries we will consider putting arbitrary taxes on their car companies.”
The risk of a tit-for-tat trade war with the US could prove a major stumbling block for Boris Johnson’s ambitions to quickly negotiate a trade deal with the country after the UK exits the EU later this month.
But Mr Mnuchin said he was confident the dispute could be worked out as he vowed to have “private conversations” with his UK counterpart.