Philip Hammond’s proposals for a new digital sales tax has faced a backlash from the US.
Political leaders and business groups from the US, including Facebook (NASDAQ: FB) and Google, have asked for more clarity and said the tax could hurt US-UK trade.
Representative Kevin Brady from Texas said in a statement: “If the United Kingdom or other countries proceed, that will prompt a review of our US tax and regulatory approach to determine what actions are appropriate to ensure a level playing field in global markets.”
A UK Treasury spokesman responded to Brady and said: “As the chancellor said, 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.”
Hammond’s proposals were shared in the latest Budget on Monday. He hopes to introduce a tax on tech companies that operate and make a large profit in the UK but pay limited tax.
“The UK has been leading attempts to deliver international corporate tax reform for the digital age,” Hammond said on Monday. “A new global agreement is the best long-term solution. But progress is painfully slow. We cannot simply talk forever. So we will now introduce a UK digital services tax.”
“It is only right that these global giants, with profitable businesses in the UK, pay their fair share towards supporting our public services.”
The proposed tax will take 2% of UK revenue from companies with over £500 million of global income in three sectors: search engines, social networking, and online marketplaces.
