“Our digital services tax (DST) is reasonable, proportionate and non-discriminatory.
“It’s also temporary.
“We’re working positively with the US and other international partners to find a global solution to this problem and will remove the DST when that is in place.”
Now Washington is threatening to impose a 25 percent tax on UK exports of clothes, make-up and video game consoles in retaliation.
Last April, the UK brought in a new digital services tax that is hoped to ensure search engines, social media platforms and online marketplaces pay their fair share to the exchequer.
However, the Biden administration claims this new tax unfairly targets US firms.
Now, in retaliation, the US is preparing an imports tariff counter-measure, in an effort to coerce the UK to discard the new tech firm tax.
The long list of sectors affect by the proposed tariffs are those companies that produce make-up, coats, dresses, shirts, ceramics, gold necklaces, air conditioning machines, furniture and game consoles.
In October 2018 former UK chancellor Philip Hammond introduced the new tech firm tax that would see a two percent levy on the profits of big tech firms.
The tax only applies to the largest tech firms, the mostly originate in the US.
The new tax will target firms with UK digital services revenues of more than £25million.
Boris Johnson has tried to reassure the US that the new tech tax will be scrapped once a solution has been agreed that makes sure tech firms pay proportionate amounts of tax in the countries where they operate.
After the US protested the tax, the UK Government ignored Washington and pressed ahead with the measures.
This then led the US to task its Trade Representative Office to study if the UK’s new tax scheme would discriminate against US firms.
They then released their findings in January, stating that the digital services tax “is unreasonable or discriminatory and burdens or restricts US commerce, and therefore is actionable”.
The new tax scheme aimed at tech companies will see these US-based firms coughing up $325million (£235million) per year to the UK in taxes.
In order to encourage the UK to scrap the new tax scheme, the US has presented a large list of UK exports which could become economically inviable when hit with increased US tariffs.
It was Donald Trump’s regimes that first threatened the tariffs, however, now President Biden’s administration has decided to continue with it.