If a tax on digital services is imposed by the United Kingdom, the United States could consider imposing additional tariffs on cars that are manufactured in the UK, said the US Treasury Secretary Steven Mnuchin.
Any taxes on digital companies and digital services is considered to be unfair treatment of American companies, said Mnuchin at the World Economic Forum in Davos, Switzerland, referring to the one imposed by France last year and the one that is being planned by the UK.
With regards to the digital tax imposed by France and after US president Donald Trump threatened to impose huge tariffs as high as 100 per cent on French wine imported to America, Trump and his French counterpart, Emmanuel Macron, agreed this week to call time out over the issue. Last year, France imposed a 3 per cent tax on revenues generated by digital service companies from France.
Washington would consider imposing tariffs on UK car exports, Mnuchin said when he was questioned about what step Washington could take if London decides to impose the tax.
“If people just want to just arbitrarily put taxes on our digital companies, we’ll consider arbitrarily putting taxes on car companies,” said Mnuchin. However officials of the Trump administration also said that he was confident that the issue would be resolved between the two countries.
There were plans of going ahead with the digital services tax in April, said UK finance minister Sajid Javid, who was also on the panel. It needs to be mentioned that the UK is trying to negotiate a free trade agreement with the US after getting over with Brexit.
“We’re going to have some private conversations. I’m sure this will be worked out, if not at our level then between the prime minister and the president who have an excellent relationship,” Mnuchin added.
A global resolution to the issue of how to tax digital services was the best solution, both the countries agreed. A globally acceptable solution is expected to establish a framework about how countries can create and impose a set of new regulations for collection of taxes form digital services sold by companies that are based in foreign countries. The Organization for Economic Cooperation and Development is currently holding negotiations on the issue.
If the US does go on to impose additional tariffs on UK made cars, it would be a huge blow to the industry that is already facing troubles because of economic slowness as well as Brexit.
According to the UK Society of Motor Manufacturers and Traders, there has been a decline in production in the UK auto industry over 17 of the last 18 months after about four years of uncertainty over the UK leaving the European Union. According to the most recent data available, there was a 17 per cent drop in production in the industry in November.
Almost 20 per cent of the cars exported from the UK go to the US according to the SMMT, which signifies the impact that any US tariffs will have on the UK auto industry.
(Adapted from CNN.com)