HM Treasury has denied reports claiming that the British government is planning to drop the digital services tax (DST) on tech firms - like Google, Facebook and Amazon - due to fears that it could hurt a trade deal with the US.
A spokesperson from the Treasury told the Guardian there is no plan to drop the tax, and that it would be repealed only after a global agreement is reached on how to tax big tech firms.
"We've been clear it's a temporary tax that will be removed once an appropriate global solution is in place, and we continue to work with our international partners to reach that goal," the spokesperson said.
Earlier on Sunday, a report by the Daily Mail claimed that British finance minister Rishi Sunak is not interested in levying the DST on tech firms, stating that it does not raise much money and could jeopardise a push for post-Brexit US trade deal.
The newspaper said that Chancellor Sunak told one of its sources the digital tax could anger President Trump, thereby creating "more trouble than it is worth."
Britain introduced the two per cent tax in April, after slow progress on a global agreement over how to handle taxing big technology companies, many of which are American.
At the announcement, the British government said it would levy the tax against firms whose annual global revenues from digital services exceed £500 million. Of that figure, more than £25 million must be from the users based in the UK, as per the government guidelines.
'The Digital Services Tax will apply to a group's businesses that provide a social media service, search engine or an online marketplace to UK users,' the government's policy paper on DST states.
'If the group's revenues exceed these thresholds, its revenues derived from UK users will be taxed at a rate of 2%. There is an allowance of £25 million, which means a group's first £25 million of revenues derived from UK users will not be subject to Digital Services Tax.'
The HMRC estimates that the DST would raise an extra £515 million in taxes by the end of fiscal 2025.
According to the BBC, Sunak and the finance ministers of Italy, France, and Spain, wrote to US Treasury Secretary Steven Mnuchin in June, stating that the tax was essential to cover the cost of recovery from the Covid-19 pandemic. The letter also said that Google, Facebook and Amazon had become 'more profitable' during the pandemic and had to 'pay their fair share of tax.'
Responding to the letter, Mnuchin said that the US was opposed to the concept of DST and similar unilateral measures and would respond with "commensurate measures" if other countries levy such taxes on American firms.
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