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US Posturing On Digital Tax Shows The Shape Of Things To Come

By Dr. Mike Campbell
Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.

If Brexit happens, the UK will be trying to negotiate trade deals around the world, not as a member of the largest trading bloc on the planet, but as a nation of some 65 million people. Inherently, it is intent on moving from a position of strength to one of weakness.

In the British budget speech, Philip Hammond, the Chancellor of the Exchequer, proposed that the UK would levy a 2% tax on sales (presumably advertising revenue) by search engines, internet marketplaces and media platforms. The proposal is novel since it would be on sales revenue rather than profit. The proposal is similar to moves by the EU to place a 3% levy on such firms grossing more than €750 million per year.

The US reaction has been hostile to the approach and has been conflated with the prospects of the UK obtaining a good US-UK trade deal post Brexit. US politicians have suggested that the proposal would violate international tax agreements by applying to US firms (rather than their local surrogates). They have suggested that such a move could spark US retaliation and affect any UK-US trade agreement. Kevin Brady, Republican Representative for Texas said: "If the United Kingdom or other countries proceed, 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".

The UK’s Treasury spokesman commented on Brady’s views noting: "As the chancellor said, this tax is a proportionate and targeted interim response that reflects the changing global economy, and how digital businesses derive value from users - it's not targeted at any country and seeks to ensure the tax system is fair."

The US are plainly hostile to such a tax, but would be in a much weaker position if it was applied by the EU than one former member state of the block; particularly a nation desperate to agree trade deals to replace the ones it will lose on leaving the EU…

Dr. Mike Campbell
About Dr. Mike Campbell
Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.
 

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