Chancellor Sajid Javid should abandon UK plans to start taxing US tech giants and wait for countries to agree an international levy, Facebook’s Nick Clegg has urged.
Ministers want to impose a 2% digital services tax on big firms – including the “GAFA” four (Google Apple, Facebook and Amazon) – despite mounting pressure from the US over the measure.
Clegg, the ex-deputy PM who became head of global affairs for Facebook, said the UK government should follow France in delaying the levy, due to be imposed in April, to give international talks “time to succeed”.
Critics have suggested such an approach allows tech firms to kick the can down the road and avoid paying up.
The planned digital services tax also comes ahead of US-UK trade talks opening with lobbying groups such as the US Chamber of Commerce demanding no tax on US tech firms.
Clegg argued the best thing was for “the world to come together to tax the online world more rationally and better and more completely and more fully than the tax rules currently allow”.
He added: “The current tax rules allow for a bricks and mortar world where the thing you are trying to tax was the production of physical goods. Everybody agrees on that. Everybody agrees that you can only do that internationally.
“You can’t have 2% here, 3% there – that patchwork is never going to make sure that companies like Facebook pay their fair share around the world, which is quite rightly what everybody wants to see happen.
“So I would have thought that, when the dust settles a bit, I would have thought that it makes sense for Britain to follow France’s example, which is not saying that they are abandoning their plans to impose a tax – of course every jurisdiction is free to do so, including the British government – but just at least do so in a way that gives maximum chance for international talks to succeed.”
At a meeting at the World Economic Forum in Davos, Steven Mnuchin, the US treasury secretary, turned up the heat on Javid over the tax.
He claimed the digital services levy – also nicknamed the “Amazon tax” – discriminated against American companies. He threatened retaliation, suggesting there could be a new tax on UK car exports to the US.
Tory ministers, however, face demands from voters to act, with many feeling tech firms are not paying their fair share.
To take the example of Amazon, the company paid just £220m in direct taxes last year despite its total UK revenues amounting to £10.9bn. Facebook, meanwhile, paid £28m tax after making a record £1.6bn revenues in the UK.
Clegg said “no one wants to see trade wars” and called on Javid to row back.
He said: “Equally no one wants to see what is in the end a solution which is not sustainable, which is lots of patchwork taxes set at different levels and different – which by the way doesn’t in the grand scheme of things raise that much money either. That’s the irony.”
He added: “I would just throw the question back at Sajid Javid and say you are not giving anything up by giving the international talks time to succeed.”