The UK Treasury announced in its budget report that it is going to impose a 2% Digital Services Tax on British revenues of American companies starting in April.
This tax will result in double taxation, less innovation, negative economic growth, and will lead to higher costs for British businesses and price hikes for British consumers.
The design of the British tax is very similar to the French, and other unilateral European Digital Services Taxes. It will levy an estimated £2 billion and will be imposed on companies with at least £500 million in global revenue and £25 million in UK revenue. This tax is discriminatory as it is exclusively targeting American companies like Google, Facebook, Amazon, and Apple.
This launch comes as a surprise as the UK is preparing to negotiate a post-Brexit trade deal with the United States. After fierce opposition from the Trump administration, many European countries are backing down from their Digital Services Tax efforts to avoid a trade war and instead wait for an international solution through the OECD negotiations.
The Trump administration should make this a deal-breaker during the upcoming trade negotiations with the UK.