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UK vows to press ahead with digital services tax as France U-turns

The British government has vowed to press ahead with plans to introduce a revenue tax on tech firms after France dropped similar proposals in the face of US pressure.

French president Emmanuel Macron revealed earlier this week that he had reached an agreement with the US to shelve the tax plan amid hopes that the OECD will reach an international agreement on the matter later this year.

But speaking at the World Economic Forum in Davos on Wednesday, chancellor Sajid Javid confirmed that the government plans to “go ahead with our digital services tax in April”. He added: “It is a proportionate tax, and a tax that is deliberately designed as a temporary tax. It will fall away when there is an international agreement.”

Responding to Javid’s remarks, the US treasury secretary Steve Munchin threatened to retaliate: “If people want to just arbitrarily put taxes on our digital companies, we will consider arbitrarily putting taxes on car companies.” “I’m sure the president and Boris [Johnson]will be speaking on it as well,” he added.

Under the UK’s proposals, digital services firms such as Facebook, Google and Amazon will face a new two per cent tax on their UK earnings. The plans were proposed by the last government, but they also featured in Boris Johnson’s election manifesto in December.

Countries such as France and the UK planned to take unilateral action on the issue last year after efforts to create an EU-wide fiscal regime broken down amid opposition from Ireland. It had been hope the tax could generate as much as €5bn a year across the bloc.

The issue of digital taxation is not the only issue on which the UK is likely to find itself at odds with the US in the coming weeks. American officials have also lobbied Downing Street to ban the Chinese tech giant Huawei from the rollout of the UK’s 5G network.