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Daily Tax Report: International

Digital Tax Would Kill Hope for U.S.-U.K. Trade Deal: Lawmakers (1)

July 11, 2019, 5:33 PMUpdated: July 11, 2019, 9:45 PM

Senior members of Congress from both sides of the aisle continued the storied American tradition of opposing British taxes imposed on U.S. taxpayers.

Leaders of the committees charged with setting tax and trade policy said July 11 that a U.K. digital services tax would impair a potential post-Brexit trade deal between the U.K. and the U.S.

“I met with the U.K. officials earlier, and said, ‘You expect a trade agreement with the United States and the U.K. It will not happen with your digital services tax. Period. Full stop,” Sen. Ron Wyden (Ore.), the top Democrat on the Senate Finance Committee, told reporters.

Wyden’s statements came the same day that France’s Senate passed a 3% tax on tech giants’ digital revenue. Wyden and Senate Finance Committee Chairman Chuck Grassley (R-Iowa) supported the Trump administration’s July 10 decision to investigate retaliatory tariffs on French imports.

Rep. Kevin Brady (Texas), the top Republican on the House Ways and Means Committee and an ally of President Donald Trump, agreed that the digital services tax would impede post-Brexit trade talks.

“It’s not the way to start this discussion,” Brady told Bloomberg Tax.

The U.K. released details of a proposed 2% tax on digital revenue July 11, as part of its 2019-2020 finance bill. The tax would apply to businesses with at least 500 million pounds ($625 million) of worldwide digital revenue and 25 million pounds of U.K. digital sales.

French officials have said the digital tax is a placeholder until the Organization for Economic Cooperation and Development reaches consensus over how to rewrite global tax rules.

Wyden expressed skepticism that British or French digital taxes on U.S. tech giants operating there would ever be rolled back, arguing that those companies would be “stuck with all of these very punitive consequences that hurt American jobs” and the U.S. economy.

Meanwhile, Ways and Means Chairman Richard Neal (D-Mass.) said he had other concerns about a trade deal before even considering the digital taxes that would affect U.S. companies.

“I’m opposed to it until we figure what they’re going to do with the border” between Northern Ireland and the Republic of Ireland, a key issue in Brexit negotiations, said Neal, one of the most active members of Congress on issues affecting Ireland. Neal said he would reiterate that concern to Karen Bradley, the British Secretary of State for Northern Island.

—With assistance from Hamza Ali.

To contact the reporters on this story: Colin Wilhelm in Washington at cwilhelm@bloomberglaw.com; Isabel Gottlieb in Washington at igottlieb@bloombergtax.com

To contact the editors responsible for this story: Meg Shreve at mshreve@bloombergtax.com; Kathy Larsen at klarsen@bloombergtax.com