Premium

Government risks angering Trump as it pushes ahead with digital services tax

Philip Hammond
Philip Hammond had previously said the tax would be 'narrowly targeted' Credit:  REUTERS

The Government has risked provoking Donald Trump into retaliating against the UK by targeting Silicon Valley tech titans with a new tax, just hours after France was blasted for its own new digital levy.  

Philip Hammond today outlined plans for the UK's new digital services tax, which will come into force next year, and will directly hit the likes of Facebook, Google and Amazon.

The release came amid an escalating war of words between French ministers and the Trump administration, which saw the US order an investigation into tax proposals and pave the way for retaliatory tariffs against the EU nation for approving its own digital tax. 

Trade body TechUK warned the latest move by Mr Hammond could put the UK in the firing line. Giles Derrington, head of policy at the group, said it was leaving the UK “at risk of retaliation from the US government that would hurt British businesses and consumers”.

There were, however, some signs that not all US tech giants would be hit. For example, companies which “primarily develop or acquire content to display it to customers will naturally not fall in scope of the definitions”.

The Treasury said it did not need to include a specific exemption for companies which “stream, broadcast or publish media like film or music”.

The comments came as a sign that Netflix and Amazon Prime Video, as well as Swedish giant Spotify, look set to escape the punitive taxes. 

It had initially looked to target social media companies, search engines and marketplaces, imposing a 2pc levy on profitable businesses generating more than £500m in global revenue and more  than £25m in UK revenue. 

On announcing the tax during the Budget last October, Mr Hammond had said it would be “narrowly targeted”.  The chancellor took the step, after facing pressure over the perceived low levels of tax paid by technology giants in the UK, with Facebook  paying just under £16m in 2017, and Amazon £4.6m.

Those companies have always said they pay all the tax required in the UK.

However, industry groups warned yesterday that it could hurt British businesses more than their Silicon Valley rivals. Mr Derrington said “it risks creating an outcome where UK-based tech firms actually end up paying more tax than their international competitors”, referring to the fact they may pay higher levels of corporation tax.

There has been mounting concern from British businesses over whether they would be included in the tax, and earlier this week, The Daily Telegraph revealed property portals had been privately voicing concerns about whether they would come in the scope of the tax.

In the consultation documents, released on Thursday, it emerged that Rightmove had submitted a response to the consultation. 

The push by both the UK and France to implement their own digital services tax comes after talks stalled at an EU level.

Many EU nations argued in favour of waiting for the Organisation for Economic Cooperation and Development (OECD), to overhaul of global tax laws on tech giants, which is expected by the end of next year. Critics believe that the OECD will not reach a consensus because of opposition from the US.

US officials have previously warned that if the UK proceeds with its tax plans, “that will prompt a review of our US tax and regulatory approach to determine what actions are appropriate to ensure a level playing field in global markets”.