Donald Trump has sent a warning to the UK that he can impose harsh tariffs should it fail to withdraw its digital services tax policy.
In an interview from the Oval Office, President Trump said, “We could certainly hit back with a big tariff.” This is because, according to him, the UK’s tax system unfairly penalizes American technology companies, and therefore, any tariffs imposed will be equal or even more than the taxes levied by the UK.
UK announced the digital services tax earlier last year. It includes imposing a 2% tax on the revenues earned by large technology firms within the jurisdiction of the UK. Technology companies impacted by the policy are the likes of Amazon, Apple, and Google, among others.
Though threatened, officials from the UK Government made it clear that they were not planning on backing off from the tax. According to a spokesman for Prime Minister Keir Starmer, the tax was fair and proportionate and served its purpose of ensuring multinationals paid their dues accordingly.
This row has brought to light a larger conflict surrounding the global taxation of tech firms. While the UK had agreed, along with more than 130 countries in the Organisation for Economic Co-operation and Development, to gradually abolish the tax in favor of a new international regime, the failure to implement the deal means the UK still applies the levy.
In general, Trump’s criticism comes at a time when the relationship between the two nations is already under strain, especially in relation to foreign policy differences. Trump’s past complaints about tech firms’ taxation in Europe, which he says discriminates against US companies, come to mind.
The conflict remains unresolvable, with both parties sticking to their stance, making it possible for another trade war to erupt.
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