Friday 24 January 2020 4:09 am

DEBATE: Is it worth scrapping the digital tax for the sake of a UK-US trade deal?

and Areeq Chowdhury
Areeq Chowdhury is a head of Think Tank Future Advocacy.

Is it worth scrapping the planned digital services tax for the sake of a UK-US trade deal?

Morgan Schondelmeier, head of development at the Adam Smith Institute, says YES.

Europe and the US fundamentally disagree about how to approach tech companies. The US has become a world leader by embracing permissionless innovation and growth, while Europe strangles new companies with red tape, high taxes, and punitive measures.

A digital services tax would discourage investment and hurt the UK economy. It would act as a protectionist measure against successful US firms that provide immensely valuable services to British consumers. Recent research by the Internet Association found that the sector provides nearly 400,000 jobs across the UK — an average of 590 per constituency.

Playing with discriminatory taxes is dangerous business. We will find that the US will not be strong-armed, and will seek to punish UK producers with its own retaliatory tariffs.

It is not worth sacrificing a trade deal with the world’s biggest economy for the sake of an economically self-harming tax. Focus instead on positive, mutually beneficial arrangements, not petty tit-for-tat.

Areeq Chowdhury, head of Think Tank at Future Advocacy, says NO.

The wealth and power of the tech giants coupled with the scale of the societal challenges which they have created makes it is essential that we levy effective taxation upon them.

The suggestion by the OECD that the best approach would be for the UK government to bin the planned digital services tax and instead wait for a global solution is fantastical. If such a solution were to materialise, it would not be implemented for at least a decade — and we cannot afford to wait that long.

The challenges of abuse, disinformation, and online radicalisation exacerbated by social media platforms require hard cash which the likes of Google and Facebook should be contributing through our tax system — now.

The US will no doubt object to taxes against their industries, regardless of whether it’s a global tax or a national one. The solution will be to negotiate sensibly with the US on this issue, instead of caving completely to each and every American demand.

Main image credit: Getty