The government should quietly drop its proposed Digital Services Tax

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BY TOM HARWOOD

Drowned out by the rightful celebration of the dawn of an independent United Kingdom, something else extraordinary happened this week. Many may have missed it. Sadiq Khan quietly came out against the Government’s proposed unilateral Digital Services Tax.

In an interview with CityAM, the Labour politician gave his most troubling quote of the mayoral campaign so far: “I think we’ve got to realise that we’re a global city, we work in a global economy, to unilaterally impose taxes in one country could have unintended consequences, making them move elsewhere.”

It was troubling for one reason alone – on this, Sadiq is right.

After years wooing the Corbynista crowd and pursuing bonkers, regressive, and harmful policies like his utterly discredited rent control, the London Mayor managed to somehow sound more sensible than the Government.

This is a deeply troubling development. The Government sticking by a May-era legacy policy (which amounts to a targeted tariff against our friends in the United States, as well as a kick in the teeth to British consumers) has allowed Sadiq Khan of all people to almost sound more fiscally sensible than Boris’ government.

It goes without saying that Sadiq’s stance on just about every single other issue means that no believer in the progressive power of free market economics should back him. His stance on this issue, however, should give policy people pause for thought.

From April 2020, the government is currently set to introduce a tax on the sales, not the profits, of internet firms. Just at the time that Brexit Britain needs to make bold steps to prove it is the best place in the world to do business, this new tax is set to scupper some of our new potential.

Announced in Philip Hammond’s 2018 budget, the measure is not dissimilar to France’s proposed ‘GAFA’ tax – so called because it is parochially pointed at American companies Google, Apple, Facebook and Amazon. Like the French GAFA, the DST would disproportionately hit American companies in a way that acts as a de facto protectionist tariff, potentially breaching WTO rules. Not only would this make goods more expensive for consumers in the UK, it’s exactly the kind of EU-style proposal that we should be eschewing in order to take full advantage of the benefits of Brexit.

If this government is to truly help the left behind towns of this country that delivered the Prime Minister his stonking majority, it will need to ditch May era policies like the DST that only serve to drag the UK backwards. In order to level up the country, Boris has to deliver on his promise to ensure we have a dynamic free market economy attracting investment from all around the world.

It is a kick in the gut when a left wing politician like Sadiq Khan (who is normally preoccupied with publicity officers finding ever more creative ways to ignore London’s crime problem) comes out with an opinion that is more economically switched on than the Government. It’s truly time for Number 10 to wake up, and level up the country not with tax hikes on the successful, but with tax cuts for the struggling.

Tom Harwood is an award-winning journalist and commentator. Follow him on twitter: @tomhfh