UK under increasing pressure to drop planned digital services tax

Will the UK actually introduce its digital services tax (DST)?  

The UK DST is intended to apply from 1 April 2020, although the legislation has not yet been enacted. The UK is under pressure from both the US and the OECD to hold off on the DST and to wait for a global solution to the taxing right allocation issues raised by the digital economy.

The French DST is already in force but, following the threat of US tariffs, France has agreed to suspend collection of the tax pending the outcome of the OECD discussions.  If a global solution is reached by the end of 2020, France has agreed not to apply its unilateral DST.

A post-Brexit UK-US trade deal is crucial to the UK but President Trump has made it clear that unless the UK drops its DST there will US tariffs imposed on UK products and no possibility of a comprehensive trade deal.

At the World Economic Forum in Davos the OECD's Secretary General, Angel Gurria, called for the UK to “hold fire” on its DST in an attempt to prevent a transatlantic trade war.  But the UK Treasury line appears to remain that the DST will be brought in and then repealed once a global solution is in place.

Agreement on a global solution by the end of 2020 is imperative for the coherence of the international tax system.  Whether or not it is actually possible to reach agreement within this timescale remains to be seen and we eagerly await the outcome of the OECD meetings 29-30 January, where the architecture of a global solution is to be agreed.