The 2 percent Digital Services Tax (DST) assessed against social media platforms, internet search engines and online marketplaces, will be abandoned because Chancellor Rishi Sunak reportedly told a source that angering Trump is "more trouble than it is worth," the Daily Mail reported.
According to the publication, the DST is a major stumbling block to an international trade deal with the U.S.
According to The Guardian, however, the HM Treasury, the U.K.’s economic and finance ministry, denied that it will repeal the tax, explaining instead that it would "drop the digital services tax when there was a global agreement on how to tax big multinational tech firms, which pay very little tax in the U.K. and other countries where they operate."
“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,” said a spokesman from the HM Treasury, both papers reported.
Adopted in April, the tax is levied against companies whose annual worldwide revenues from digital services exceed 500 million pounds ($654.2 million). Of that number, more than 25 million pounds ($32.7 million) must be from users in the U.K., the Daily Mail reported.
In June, Sunak and the finance ministers of France, Italy and Spain, wrote to U.S. Treasury Secretary Steven Mnuchin to say the tax was needed to defray the cost of the recovery from the pandemic, the BBC reported.
“The COVID-19 crisis has confirmed the need to deliver a fair and consistent allocation of profit made by multinationals operating without, or with little physical taxable presence,” according to the letter obtained by the BBC.
The letter also said Google, Amazon and Facebook benefited from the pandemic and became “more powerful and more profitable” and must “pay their fair share of tax,” the BBC reported.
In response, Mnuchin wrote to say that the U.S. was unable to agree on changes to global taxation law that would impact the country's leading digital companies, the Financial Times (FT) reported.
“The United States remains opposed to digital services taxes and similar unilateral measures,” Mnuchin wrote, according to FT. “As we have repeatedly said, if countries choose to collect or adopt such taxes, the United States will respond with appropriate commensurate measures.”