US senators warn that UK digital sales tax could stop free trade deal
Senior members of the US Senate’s finance committee have warned that the new UK digital sales tax could be a major barrier to a future free trade deal.
Republican Chuck Grassley and Democrat Ron Wyden said the new levy “unnecessarily complicates the path forward for a US-UK trade deal”, while also calling for the UK to “reconsider this punitive action against its ally”.
The committee oversees trade deals and must tick off all US free trade deals before they are ratified, meaning the latest comments could spell trouble for negotiations.
The UK government implemented a 2 per cent tax on multinational companies that derive revenues from the “provision of a social media service, a search engine or an online marketplace to UK users” from April.
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This could lead to an increase in taxation for large US technology companies, particularly Silicon Valley’s social media firms, during a global economic downturn.
The US may use this tax as a bargaining chip in the UK-US trade deal, which already has a number of stumbling blocks.
The UK government has said over the past year about how it could close a trade deal with Donald Trump in quick time, however it is not expected to be completed this year.
Completing a US trade deal is a key part of Boris Johnson’s vision for a “global Britain”, after the UK leaves the EU single market and customs union on 31 December.
One of the key areas in negotiations is US agricultural goods, which is one of the country’s most important export sectors.
Concerns have been raised that the UK government will lower its food standard requirements to strike a trade deal that allows US agriculture exports into Britain, a claim that has been denied.