Britain denies dropping the digital services tax

The Ministry of Finance in Britain denied a report of its intention to drop the tax on technology companies, such as: Facebook and Google.

Britain imposed a digital services tax in April after slow progress in global negotiations over how to tax the tech giants, many of them US companies.

The Mail on Sunday reported that Finance Minister Rishi Sunak intends to drop the tax because he does not raise much money – about 500 million pounds ($ 654 million) a year – and could hurt the push for a US trade deal.

A spokesperson for the Ministry of Finance said: “We have made clear that it is a temporary tax that will be abolished once a suitable global solution is implemented – and we continue to work with our international partners to reach this goal.”

Former British finance minister Philip Hammond designed the tax, which is levied at a rate of 2% of sales, to ensure that global tech companies pay at least some taxes on the revenues, if not the profits, they make in Britain.

Tax restrictions ensure that almost all of the revenue comes from US technology companies. The tax only covers companies with revenues of 25 million pounds, and the list of companies affected include: Google, Facebook and Amazon.

Successful European digital companies such as Spotify were excluded because they did not operate the search engines, social media services, and online marketplaces.

Critics have warned that the internet giants will pass the tax costs onto customers, and Amazon announced earlier this month that it would increase seller fees from September after talks with the government over the digital services tax failed.

Amazon said it has borne the impact of the digital services tax since it became law, but will now transfer costs via different fees starting September 1. US officials, in private and public, have raised the digital services tax for several months as an obstacle to any business deal.

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