Johnson sticks with UK digital tax plan despite tariff risk
President Donald Trump spent part of Tuesday blasting France for its digital tax plan because he said America should be the one to “take advantage” of American companies. Despite the risk of a similar backlash, UK Prime Minister Boris Johnson is vowing to move ahead with his own digital tech tax.
The planned UK tax will place a 2% levy on sales of digital services in the United Kingdom, and is due to take effect in April 2020. The tax invites the possibility of American retaliation and could further inflame trade tensions.
US trade officials Monday proposed tariffs of up to 100% on $2.4 billion worth of French goods after the country implemented its own 3% digital tax this year on revenue from companies that earn more than €25 million (around $27.7 million) in France, or €750 million (around $830 million) worldwide.
The American government has said these digital taxes unfairly target American companies. Countries such as France and the United Kingdom claim that companies like Google, Amazon and Facebook don’t pay their fair share in countries where they have major businesses.
“On the digital services tax, I do think we need to look at the operation of the big digital companies and the huge revenues they have in this country and the amount of tax that they pay,” Johnson said Tuesday while on an election campaign stop in Salisbury, England. “They need to make a fairer contribution.”
Taxing big tech is a topic the main UK political parties seem to agree on ahead of a December 12 election. Implementing the digital services tax is part of Johnson’s Conservative Party election manifesto. The opposition Labour Party has also vowed to raise more taxes from digital tech giants.
The British tax will only apply to profitable companies with global revenues of at least £500 million ($640 million) a year. Few non-American tech companies would fall under such classifications.
Johnson’s intention to move ahead risks further escalating transatlantic trade tensions, after the United States imposed tariffs on $7.5 billion worth of European goods because of a dispute over government subsidies to Airbus. Those tariffs will make it more expensive for Americans to buy British goods like tailored suits made on London’s Savile Row, as well as whisky and cashmere sweaters from Scotland.
Speaking during the NATO summit on Tuesday, Trump said if any country were to “take advantage” of American companies by taxing them,”it’s going to be us.”
The United States wants countries to wait for a new global framework for taxing digital companies being developed by the Organization for Economic Cooperation and Development. The OECD hopes to have an agreement in principle among its 36 member states by January.