Britain and America were at loggerheads today over a new digital services tax as Sajid Javid insisted the Government would go ahead with the levy in April.
The Chancellor defended the move as a “proportionate” tax and stressed that it was designed to be temporary and so would “fall away” once an international agreement could be reached, which he believes could be struck this year.
However, US treasury secretary Steven Mnuchin made clear Washington is still seeking to persuade the UK Government to ditch its unilateral tax on companies such as Google, Facebook and Amazon, many of which are based in America.
Speaking on a panel alongside Mr Javid at the World Economic Forum in Davos, he said: “We’ll be having some conversations about that. I’m sure the President and Boris will be speaking as well, as he did with [Emmanuel] Macron.”
The French president agreed earlier this week to delay collecting a new tax on multinational technology firms until the end of the year.
The Trump administration has been threatening retaliatory tariffs against countries who impose the new tax, arguing it should be an internationally agreed levy and that current proposals by other nations would discriminate against US firms.
Britain is proposing a two per cent levy on revenues from UK users which is expected to raise around £500 million a year.
The levy was the subject of intense discussion among political and business leaders at the Swiss gathering.
Ángel Gurría, secretary general of the Organisation for Economic Cooperation and Development, urged the UK to “hold fire” on the new tax, warning that without an international pact there could be a “mess” of dozens of countries introducing different systems.
Some digital firms have been accused of avoiding paying their “fair” share of tax in some countries.