Tax on tech giants will rule out trade deal, US warns Britain

The US will not negotiate a free trade deal with the UK unless a new digital services tax is dropped, according to a report.

It is estimated that the 2% tax will raise more than £400m for the Treasury by 2022 but the US sees it as a “tax grab” on American companies.

The measure, which was proposed by then chancellor Philip Hammond in 2018 in response to fears that technology giants were not paying their fair share of tax, is due to come into effect in April next year.

But US President Donald Trump’s administration is demanding that it be ditched, according to The Daily Telegraph.

The threat had been “communicated to the UK government at multiple levels”, the newspaper said, quoting a source as saying: “The message was ‘if you go ahead and introduce this tax, we will not begin free trade negotiations with you’.”

The report comes just days after Mr Trump said he and Prime Minister Boris Johnson had started working on a free trade deal between their two countries.

But the Telegraph said that Liam Fox was among those warned about the digital tax by senior US politicians last month while he was international trade secretary.

Via The Telegraph / Sky News