US threatens British tariffs in retaliation for digital taxes

Introduced last year, the UK tax specifically targets big tech firms - the majority of them American

The Biden administration has warned that it could put tariffs of up to 25 per cent on British exports in retaliation for a UK digital services tax (DST) on American tech firms.

The Amerian levies are designed to raise about $325m (£235.8m): equal to estimates of how much the UK will raise from its digital tax.

Ceramics, games consoles, beauty products, furniture, footwear and overcoats are among the goods that could see a price increase as a result of new duties, according to a list published by the White House administration.

US Trade Representative Katerine Tai said last week that the US is continuing to work on potential tariffs targeting the UK, India, Austria, Spain, Italy and Turkey, in retaliation for their digital taxes.

"We will maintain our options under the Section 301 process, including, if necessary, the imposition of tariffs," she said in a statement.

Tai added that her office would proceed with measures including filing public notices and collecting public comments, as part of investigations launched last year by the Trump administration into the new taxes announced by multiple countries, mainly targeting American technology firms.

A UK government spokesperson told the BBC that the purpose of the digital levy was to ensure that "tech firms pay their fair share of tax".

"Should the US proceed to implement these measures, we would consider all options to defend UK interests and industry," the spokesperson added.

The UK introduced the two per cent DST in April last year, after slow progress on a global agreement over how to handle taxing big technology companies - many of which are American.

At the time of announcement, the British government said that it would levy the tax against firms whose annual global revenues from digital services exceed £500 million. More than £25 million must be from the users based in the UK.

The DST specifically applies to businesses providing social media, search engines or online marketplace services to British users - meaning that Facebook, Google, Twitter and Amazon are all targets.

The Trump administration criticised the tax, accusing the UK and other European countries of unfairly targeting US firms.

The US government argues that the digital tax has 'unreasonable, discriminatory, and burdensome attributes'.

However, it appears that although it is seeking to protect US interests, the Biden administration wants a more conciliatory relationship on trade with the UK than Donald Trump.

Last month, the US agreed to suspend duties on British goods, including single malt whiskies, levied by Trump in retaliation to subsidies provided to aircraft manufacturer Airbus.

Earlier in December, trade officials from the US and UK held discussions about the DST, where UK officials stressed that digital tax was "a temporary solution to widely held concerns with international corporate tax rules" and will be dropped after a global agreement on the issue is reached.