Treasury Secretary Steven Mnuchin warned the United Kingdom and Italy Tuesday that the United States would retaliate with tariffs if they adopted “digital services” taxes on companies such as Amazon and Facebook.
The threat followed France’s decision to postpone imposition of its digital services tax until next year in an effort to avoid retaliatory levies from the U.S.
Mnuchin told the Wall Street Journal that the U.K. and Italy should take notice of France’s action and suspend their plans as well. “If not, they’ll find themselves faced with President Trump’s tariffs. We’ll be having similar conversations with them,” he said while at the World Economic Forum in Davos, Switzerland. Italy passed a similar digital tax last year that is set to take effect later this year. The U.K. is also expected to adopt one this year.
A spokesman for U.K. Prime Minister Boris Johnson told Reuters his country was seeking an “appropriate global solution” to the issue of digital services taxation and would remain engaged on the issue.
The U.S. has threatened France with tariffs of up to 100% on $2.4 billion worth of goods, such as certain cheeses, wine, handbags, and soap, in retaliation for its tax, which it adopted late last year. The tax charges tech companies such as Facebook, Amazon, and Google based on the revenue they generate from people living in France. The Trump administration claims the tax is unfairly designed to target U.S. companies specifically and fears other countries might follow France’s example.
The digital tax is meant to make it difficult for tech companies to shift profits to the European Union’s low-tax jurisdictions, such as Ireland. French President Emanuel Macron has called it necessary to defend the interests of his country and the EU. He has pushed the Organisation for Economic Cooperation and Development, the international economic organization comprised of most Western countries, to support a similar scheme worldwide.
Macron said in a tweet Monday evening that he had talked with Trump regarding the tax and “we will work together on a good agreement to avoid tariff escalation.” Mnuchin said that, in exchange for France postponing implementation of its tax, the U.S. would hold off on the tariffs, an arrangement he called “the beginning of a solution.”
[Related: Mnuchin claims that Trump tax cuts are on track to pay for themselves]
