Budget 2018: US politicians and business groups attack UK Digital Services Tax

Chancellor Philip Hammond faces US backlash against Digital Services Tax proposal

Politicians and business groups in the US have hit out at Monday's Budget 2018 proposal for a Digital Services Tax, which will almost exclusively target US internet giants.

On Wednesday, Texan Representative Kevin Brady, chairman of the House of Representatives' Ways and Means Committee, issued a statement criticising the targeting of US companies by the Tax. He described the proposal as "troubling".

He said: "The UK's introduction of a new tax targeting cross-border digital services - which mirrors a similar proposal under consideration in the European Union - is troubling. Singling out a key global industry dominated by American companies for taxation that is inconsistent with international norms is a blatant revenue grab."

He added that the current discussions taking place within the Organisation for Economic Co-operation and Development (OECD) over should not be pre-empted by nations going it alone.

Singling out a key global industry dominated by American companies for taxation... is a blatant revenue grab

The BBC claims that a number of US business groups, such as the US Chamber of Commerce and the US Council for International Business, are also lining up in active opposition to the tax proposal.

Last week, US Treasury Secretary Steve Mnuchin warned against the kind of digital tax introduced by Chancellor Philip Hammond in the Budget. He suggested that while such a tax might be justified, it ought to be targeted in terms of financial metrics, rather than economic activity. Furthermore, it should be led by the OECD, not individual countries.

"We believe the issues are not unique to technology companies but also relate to other companies, particularly those with valuable intangibles," said Mnuchin.

A tax should be based on income, not sales, and should not single out a specific industry for taxation

He continued: "I have instructed our team to continue their efforts in the OECD so that we can make progress on these issues quickly. I highlight again our strong concern with countries' consideration of a unilateral and unfair gross sales tax that targets our technology and internet companies.

"A tax should be based on income, not sales, and should not single out a specific industry for taxation under a different standard. We urge our partners to finish the OECD process with us rather than taking unilateral action in this area."

A Treasury spokesman was nevertheless adamant that the Digital Services Tax does not unfairly target US companies: "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."

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