World News

U.S. and British ministers trade threats in tit-for-tat tax row

By Balazs Koranyi and Dmitry Zhdannikov

DAVOS, Switzerland (Reuters) – U.S. Treasury Secretary Steven Mnuchin and his British counterpart Sajid Javid clashed over taxation on Wednesday in a brewing battle over how Europe taxes the world’s biggest technology firms.

Javid said Britain would press ahead with a digital service tax in April even as Mnuchin, sitting feet away on the same stage, said such a move could generate “arbitrary” retaliation.

Several European nations are considering taxes on search engines, social media platforms and online marketplaces to compensate for lost revenues, drawing the ire of the U.S. which claims that such a tax unfairly targets US firms.

“International tax issues are very complicated and take a long time to look at. If people want to just arbitrarily put taxes on our digital companies, we’ll consider arbitrarily putting taxes on car companies,” Mnuchin told a panel at the World Economic Forum in Davos, Switzerland.

France, which considered a similar tax, agreed this week to suspend down payments for this year’s digital tax after Washington threatened retaliation with tariffs on French wine.

Britain’s Javid said Britain would not back down.

“We plan to go ahead with our digital services tax in April,” Javid said. “It’s a proportionate tax and it’s deliberately designed as a temporary tax, so it will fall away once there is an international solution.”

Seemingly trying to ease the tension, Mnuchin added that talks over the issue would be done in private, not on live television, and the key discussion is likely to be between U.S. President Donald Trump and British Prime Minister Boris Johnson.

Mnuchin also said that the U.S. was ready to strike a new trade agreement with Britain after it leaves the European Union.

“We’re very much looking forward to a new trade agreement with the UK. That’s a big priority of ours for this year”.

Mnuchin jokingly added the he was disappointed that Britain would not do a deal with the U.S. ahead of the EU given that it would be an easier negotiating partner.

(Editing by Alexander Smith)