US threatens UK with 25% tariff hike in digital tech tax row

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The US is threatening to impose up to 25% tariffs on UK exports as retaliation in a row over a digital services tax that has hit US tech giants like Amazon, Google and Facebook.

UK companies exporting ceramics, overcoats, games consoles, furniture and make-up could be affected by the tariffs, according to a list published by President Joe Biden’s administration.

The US is seeking to recoup $325 million (£238.5m) which the BBC report is the amount they believe the UK “will raise from US tech firms” as a result of the digital services tax, which was introduced last year.

Digital services tax targets revenues not profits

A “new 2% tax on the revenues of search engines, social media services and online marketplaces which derive value from UK users”, was introduced in April 2020.

The tax is applicable for firms whose UK digital services revenues exceed £25 million and whose worldwide digital services revenues exceed £500 million.

A spokesperson for Johnson’s government, said, “Like many countries around the world, we want to make sure tech firms pay their fair share of tax.

“Our digital services tax (DST) is reasonable, proportionate and non-discriminatory.

Not so, according to the Office of the US Trade Representative, who determined the tax to be “unreasonable or discriminatory and burdens or restricts US commerce, and therefore is actionable”.

UK says DST is ‘temporary’

Similar tariffs on several other countries, including India, has been threatened by the US over the imposition of the digital services tax, with the tariff hike seen as a counter measure to put pressure on Downing Street to reverse their tech tax.

A UK government spokesperson said the DST is “temporary”, explaining: “We’re working positively with the US and other international partners to find a global solution to this problem and will remove the DST when that is in place.”

They added: “Should the US proceed to implement these measures, we would consider all options to defend UK interests and industry.”

The Office for Budget Responsibility has calculated the DST would raise £300 million in the current financial year, rising to as much as £700 million in forthcoming years.

UK ceramics exports to US worth £17 million in 2020

Increased US tariffs on UK exports could, the Daily Mail reports, hit “items like make-up, coats, dresses, shirts, ceramics, gold necklaces, air conditioning machines, furniture and game consoles.”

UK ceramics – representing tiles and bathroom furniture like sinks and bidets, as well as speciality ceramics for laboratories – worth about £17 million were exported to the US in 2020, down from £24 million in 2019.

A spokesperson for the British Ceramic Confederation said they are “monitoring developments closely, working with UK officials”, while the head of the UK Fashion & Textile Association (UKFT), Adam Mansell, called the US threat to UK-made overcoats “hugely disappointing”.

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