U.K. Braces for Fresh Round of Punitive Tariffs on Exports to the U.S.

LONDON — One of Britain’s largest industry organizations has expressed dismay at the possibility of a new 25 percent tax on clothing, footwear, gold and jewelry exports to the U.S., retaliation against a digital services tax set to come into force here on Thursday.

It was only a few weeks ago that the U.S. agreed to suspend tariffs on goods imported from the U.K. in the long-running Airbus-Boeing dispute. At the time, both countries hailed the move as a step toward a post-Brexit trade deal.

“It is hugely disappointing that, yet again, our manufacturers are threatened with additional tariffs, particularly as the trade dispute has nothing to do with our industry,” said Adam Mansell, chief executive officer of the U.K. Fashion & Textile Association.

“At a time when we are trying to start discussions over a U.K.-U.S. trade deal, it is extremely important that both governments get around the table to remove this threat as soon as possible. With the industry still struggling with the impact of COVID-19 and understanding the new trade arrangements with the European Union, an additional burden on our exports couldn’t come at a worse time,” he added.

Among the U.K. exports that could be taxed are men’s and women’s outerwear, women’s and girls’ dresses, men’s shirts and ties, leather shoes, gold necklaces and jewelry made from base metal.

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The duties are designed to raise $325 million, the amount the U.S. believes the U.K. tax will raise from U.S. tech companies such as Amazon, Alphabet and Facebook. The tariffs are subject to a review in the U.S. over the next few weeks.

On Thursday, the British government will introduce a new 2 percent tax on the revenues of search engines, social media services and online marketplaces that derive value from U.K. users.

The British government said it wants to rectify the “misalignment between the place where profits are taxed, and the place where value is created,” with regard to digital businesses. It wants to ensure that large, digital multinationals “make a fair contribution to supporting vital public services” here.

The government said it believes the most sustainable long-term solution to the “tax challenges” arising from digitalization is reform of the international corporate tax rules. The government said it “strongly supports” G7, G20 and OECD discussions on long-term reform, and is committed to scrapping the digital services tax once an appropriate international solution is in place.

U.S. tech firms have long been in Europe’s firing line for basing themselves in local tax havens and paying minimal fees in the individual countries where they operate.

In 2019, Amazon posted sales of $281 billion on profits of $11.6 billion. In the U.K. that year, its sales were 13.73 billion pounds, while it paid 293 million pounds in tax.

According to the BBC, the taxes Amazon paid included business rates, corporation tax, stamp duty and other contributions. At the time, Amazon said it pays “all taxes required in the U.K.”

As of Thursday, digital businesses will be liable for the new 2 percent tax when their group’s worldwide revenues are more than 500 million pounds, and more than 25 million pounds of these revenues are derived from U.K. users.

There is an allowance of 25 million pounds, which means a group’s first 25 million pounds of revenues derived from U.K. users will not be subject to the digital services tax.

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