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US opens investigation into Britain's digital tax on tech giants

James Titcomb
US Trade Representative Robert Lighthizer with Donald Trump - AFP

The White House has taken a step towards retaliating against Britain’s tax on tech giants, opening a trade investigation into several countries’ plans to make companies such as Facebook and Amazon pay more in local markets.

Robert Lighthizer, the US trade representative, announced a “Section 301” investigation into the UK, Italy, Spain and the EU as a whole, among several other countries, saying plans for digital taxes would “unfairly target” American companies.

Britain’s digital services tax, a 2pc levy on revenues from advertising and online marketplaces generated in the UK, came into force in April and is meant to raise £500m a year. US officials have warned the tax could derail post-Brexit trade talks.

Section 301 investigations often result in retaliatory tariffs. A similar probe against France’s digital tax plans threatened duties on wine and cheese imports, until Paris agreed to postpone the tax in January.

Mr Lighthizer said: “President Trump is concerned that many of our trading partners are adopting tax schemes designed to unfairly target our companies. We are prepared to take all appropriate action to defend our businesses and workers against any such discrimination.”

US Treasury Secretary Steven Mnuchin has warned that the US could target Britain’s car industry in response to the tax.

Several countries working on digital taxes have said they would like an international agreement among OECD countries, but have been frustrated by slow progress.