One of the most senior figures in the US government has warned Sajid Javid to delay a “discriminatory” tax on big tech companies, in the latest sign of tensions with Donald Trump’s administration ahead of critical trade talks.
Steven Mnuchin, the US treasury secretary, used a breakfast meeting with the chancellor on Saturday to warn him directly against applying the new tax as part of his forthcoming budget. The confrontation comes as the US mounts a last-ditch attempt to stop Britain using technology from China’s Huawei in its 5G network.
The US president again pressed Boris Johnson on Friday night not to give the green light to the use of Huawei technology, despite reassurances from Britain’s security services that they can mitigate any security risks posed by the company.
It is among a mounting number of issues developing with the US in the run-up to trade deal talks later this year. The UK has also sided with European allies over the treatment of Iran, while the US has refused to extradite a woman charged with causing the death of teenage motorcyclist Harry Dunn.
Speaking at Chatham House, in London, Mnuchin revealed that he had raised his concerns about the proposed digital services tax, which would mean a 2% levy being applied to sales of big tech firms, during a meeting at 11 Downing Street. “We believe that the [digital services tax] is a discriminatory tax,” he said. “We don’t think it’s appropriate.” He added that such a tax contained “violations to our tax treaties”.
“We’re working through that and I think we have a good outcome of trying to give some room now in 2020 to continue these discussions,” he said.
The UK has become isolated over the issue of a digital services tax after France announced it would drop its plan for a 3% levy on the revenues of large technology companies. Javid has so far resisted calls to ditch his version of the tax, although he has said it would be lifted once an international solution to taxing big tech companies was agreed. Going ahead with the levy is likely to provoke retaliation from the US, most likely in the form of tariffs on cars.
Mnuchin also reiterated concerns about the UK’s use of Huawei technology, due to be confirmed this week. He warned that it raised concerns about security and privacy. “If you look at the role of technology, it is critical that we have infrastructure that is protected,” he said. “And we have important relationships, and I think what’s clear is for the role of government and the role of national security issues and the role of defence, we want to make sure our infrastructures are protected.
“As more and more things are connected to the network and to the grid, these national security issues go beyond the traditional aspects and go into various different aspects. I think the real issue for us is making sure that the networks and infrastructure are properly protected.”
The lobbying from the Trump regime will continue this week when Mike Pompeo, the US secretary of state, meets the prime minister and Dominic Raab, the foreign secretary.
The skirmishes could make it harder for Britain to secure a comprehensive trade deal with the US. However, Mnuchin said he was “quite optimistic” a deal could be done this year and that US-UK trade would increase. He said the US was “prepared to dedicate a lot of resources” to securing a post-Brexit trade deal.
“The UK and US have very similar economies with a big focus on services, and I think this will be a very important relationship,” he said. “And this is going back to the president during the campaign. He said, post-Brexit, they’ll be at the top of the list.”
