Brexit: Trump administration ‘tells Boris Johnson to drop tax on tech giants’ to secure trade deal

Threat raises further doubts about wisdom of no-deal Brexit

The Trump administration has made it clear to Boris Johnson that any post-Brexit US-UK free trade deal would rely on Britain dropping plans to tax large American tech firms, according to reports.

Last month, Donald Trump announced that he and the British prime minister had already discussed the projects of a free trade relationship, when he telephoned to congratulate him on winning his way to No 10.

“We’re working already on a trade agreement,” Mr Trump told reporters. “And I think it’ll be a very substantial trade agreement, you know we can do with the UK, we can do three to four times, we were actually impeded by their relationship with the European Union.”

Now it has been reported any special deal between the two countries would depend on Britain dropping the digital services tax, which was first announced by then chancellor Phillip Hammond in his October 2018 budget, and which is due to come into affect in April next year.

While campaigning to secure the Conservative Party leadership, Mr Johnson had spoken in favour of the plan to tax the British earnings of companies such as Facebook, Google and Amazon.

“I think it’s deeply unfair that high street businesses are paying tax through the nose, whereas the internet giants, the Faangs – Facebook, Amazon, Netflix and Google – are paying virtually nothing,” Mr Johnson said last month in York. “We’ve got to find a way of taxing the internet giants on their income, because at the moment it is simply unfair.”

The Telegraph said the Trump administration had made clear its opposition to the tax to “multiple levels” of the British government. As such, it would raise further questions about Mr Johnson’s claims that Britain should push for a no-deal Brexit because of potential arrangements to be forged with nations such as the US.

It was unclear whether Mr Trump had raised the tax issue directly with Mr Johnson. However, the White House told reporters on Friday morning the president and the prime minister had spoken on Thursday to discuss ”areas of further cooperation, especially relating to trade, 5G, and global security”. ”The president reiterated his strong appreciation for the special relationship between the United States and United Kingdom and noted he is looking forward to meeting with the prime minister at the G7 Summit in Biarritz, France, later this month,” said spokesperson Hogan Gidley.

If the reports of Washington’s warning is true, it would not be the first time US politicians have made clear their displeasure over the UK taxes due to be applied to major tech companies, which a White paper published last month was intended to address a “misalignment between the place where profits are taxed and the place where value is created”.

Last month, Bloomberg News reported that leaders of the congressional committees tasked with setting tax and trade policy, said a British digital services tax would impair a potential post-Brexit trade deal.

“I met with the UK officials earlier, and said ‘You expect a trade agreement with the United States and the UK It will not happen with your digital services tax. Period. Full stop’,” said senator Ron Wyden, the top Democrat on the Senate finance committee.

Congressman Kevin Brady, the ranking Republican on the House ways and means and committee, also said it would impede post-Brexit trade talks. “It’s not the way to start this discussion.”

The warning comes as France pushes ahead with its own plan to tax the revenues of major tech firms such as Google, something Mr Trump threatened to retaliate against by taxing French wine.

There was no immediate response to enquires from the White House or the US state department.

A Downing Street spokesperson told The Independent it would not be commenting on the report.