The US government has threatened to impose a 25 per cent tariff on British exports over the UK’s digital services tax on BigTech companies.

A list published by US officials revealed that new tariffs would increase the price of clothing, footwear, ceramics, beauty products, and furniture exports to the US by a quarter, according to a report by The Guardian.

The digital services tax, which was initiated last April, is a 2 per cent tax on the revenues of search engines, social media services, and online marketplaces which derive value from UK users.

Companies who earn more than £500 million, with £25 million of these revenues coming from UK users, are liable for the 2 per cent tax.

The proposed US tariffs would raise around $325 million, roughly the same amount as what would be raised from the UK tax on the sales of technology companies including Google, Amazon, and Facebook.

A UK trade department spokesperson told the newspaper that Britain wanted to ensure that “tech firms pay their fair share of tax” and said the new digital services tax was “reasonable, proportionate and non-discriminatory. It’s also temporary.”

The spokesperson said that if the US went ahead with the new tariffs, the UK would “consider all options to defend UK interests and industry.”

Last December trade officials from both the UK and US discussed the tax, with UK government sources making clear that the tax was a temporary solution to “widely held concerns with international corporate tax rules.”

The Office for Budget Responsibility found that the tax would raise £300 million in this financial year and £400 million between 2021 and 2022.

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