UK Treasury Rules Out Digital Tax Repeal

by Jason Gorringe, Tax-News.com, London

31 August 2020

The UK Government has dismissed speculation that it will repeal its digital services tax in a bid to secure a post-Brexit free trade agreement with the United States.

The UK Treasury released a statement dismissing claims made in the Mail on Sunday that the UK Chancellor Rishi Sunak had concluded that the tax was "more trouble than it is worth".

In a widely published response, the Treasury said: "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 UK carried through on its pledge to introduce a digital services tax from April 1, 2020, despite pressure from the US Government. Previously the US Government said it would consider levying tariffs on UK-made goods in response but has yet to announce such measures.

The DST applies to revenue generated by search engines, social media platforms, and online marketplaces, to revenues from those activities that are linked to the participation of UK users. It applies only to groups that generate global revenues from in-scope business activities in excess of GBP500m (USD659m) per year. Businesses will not have to pay tax on their first GBP25m of UK taxable revenues.

In July, the leaders of the US Senate Finance Committee called on the US Trade Representative to "explore all available options to respond appropriately" to the UK's tax, with committee Chairman Chuck Grassley (R-IA) and ranking Democrat Ron Wyden (D-OR) saying at the time that the tax unfairly discriminates against US businesses, damages efforts to achieve a multilateral digital tax solution, and could potentially derail efforts to conclude a free trade agreement between the US and the UK.

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