Battle of the taxes. US threatens tariffs on UK products over UK’s digital services tax

This retaliation from the US could hit UK’s exports of clothing and footwear, ceramics, beauty products, and furniture. Biden administration issued a warning towards the UK that USA could potentially slap a 25% tariff on British products imported in the US after UK levied a digital services tax on major technology companies.

The price of clothing and footwear, ceramics, beauty products and furniture exports to the US could rise by a quarter, according to a list published by US officials.

USA plans to raise around $325m with this tax which is equal to the estimates of how much Britain  expects to raise from taxing sales of digital products in the UK from US companies such as Amazon, Google, Facebook, eBay and other tech companies.

This retaliation was expected against France and Britain after they went ahead with digital services taxes before a wider agreement was in place.

A UK trade department spokesperson said the country wanted to make sure “tech firms pay their fair share of tax” and said the new digital services tax was “reasonable, proportionate and non-discriminatory. It’s also temporary.”

They added that if the US went ahead, the UK “would consider all options to defend UK interests and industry”.

The digital services tax is a tax that has been currently trending worldwide and is inevitable due to the progress of digital services and the internet. This tax has been adopted by many countries such as Canada, UK, France, Hungary, Italy, Poland, Spain, Indonesia, Brazil, Turkey, and more. USA’s threat of retaliation against only one of the countries that adopted this tax is not a viable solution for retrieving revenue losses, not to mention that most of these taxes are transferred directly to the recipients of these services by increasing their cost.

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Source: theguardian.com