UK prime minister Boris Johnson has followed France’s footsteps by pushing ahead with a digital services tax that is likely to sting a range of US-based tech giants.
The move is likely to anger US president Donald Trump, whose administration has slapped $2.4bn (£1.85bn) worth of tariffs on French exports, in retaliation for the country imposing a 3% tax imposed on revenue of digital services that happen within France.
On Tuesday evening, Johnson declared that he would stick to his Conservative party’s pledge to further tax tech giants to ensure they pay their "fair share" of tax.
"On the digital services tax, I do think we need to look at the operation of the big digital companies and the huge revenues they have in this country and the amount of tax that they pay,” he said.
"We need to sort that out. They need to make a fairer contribution."
This week, a report accused the ‘big six’ tech firms — Amazon (AMZN), Facebook (FB), Google (GOOG), Netflix (NFLX), Apple (AAPL) and Microsoft (MSFT) — of “aggressively avoiding” $100bn of global tax over the past 10 years by moving sales and profits through low-tax countries and tax havens — such as Bermuda, Ireland, Luxembourg, and the Netherlands.
Earlier this week, France imposed the new law, which is set to retroactively go into effect from early 2019. It will apply to any digital company with sales of more than €750m (£670m, $850m), in which 30 companies are expected to be affected.
The US government claimed that it unfairly affects US companies and, in retaliation, the Office of US Trade Representative released a list of the French items that face tariffs at rates up to 100% — which include make-up, cheese, and handbags.
US Trade Representative (USTR) Robert Lighthizer said the tariff decision "sends a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on US companies.
"The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets US companies, whether through digital services taxes or other efforts that target leading US digital services companies."