UK denies digital tax for ax on US pressure

The British government's Treasury department has denied that its Digital Services Tax will be scrapped after reports over the weekend that the levy on technology giants would be ditched.

The response came after a report published in The Mail on Sunday newspaper indicated that a future Brexit deal with the United States could be at risk if the tax is kept in place.

A spokesperson from the Treasury told The Guardian newspaper there is no plan to drop the tax. "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.

The Guardian report added that in June, Chancellor of the Exchequer Rishi Sunak joined with finance ministers from France, Italy and Spain in writing to US Treasury Secretary Steven Mnuchin stating that tech giants, such as Google, Amazon and Facebook, need "to pay their fair share of tax", and that the novel coronavirus crisis has made tech companies "more powerful and more profitable".

The letter, reported to have been seen by the BBC, said: "The current COVID-19 crisis has confirmed the need to deliver a fair and consistent allocation of profit made by multinationals operating without－or with little－physical taxable presence."

According to the BBC, Mnuchin responded to the letter, stating that the US was opposed to the concept of the Digital Services Tax, or DST, and would respond with "commensurate measures" if other countries impose such taxes on US companies. France delayed its plans for a digital tax after the US threatened tariffs.

'More trouble'

However, the report by the Mail on Sunday claimed that Sunak is not longer keen on the tax. The newspaper said that Sunak told one of its sources the digital tax could create "more trouble than it is worth".

Britain introduced the tax earlier this year amid slow progress on a global agreement over how to handle taxing big tech firms.

The DST collects on revenues made by companies within the UK from their search engines, social media websites and online sales, according to Her Majesty's Revenue and Customs, or HMRC.

Complaints have been made for many years that the US technology giants and others register their profits from UK sales or advertising in other countries, The Telegraph reported.

On its announcement in April, the HMRC estimated that the tax could ultimately raise more than 500 million pounds ($655 million) per year for the British government by the end of 2025.

The UK's next government budget is due in October and any change to the tax would need to be included then.