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US threatens to rule out trade deal with UK unless digital tax scrapped

The U.S. has warned that it will not pursue a free trade deal with the U.K. unless the country drops plans to impose a 2% tax on revenues of multinational technology companies, London's The Daily Telegraph reported Aug. 2.

The threat was reportedly communicated to "multiple levels" of the British government, with U.S. officials demanding that the proposed digital services tax be scrapped before it becomes law in the fall.

Britain's new secretary of state for international trade, Liz Truss, has already expressed concerns that tighter rules against U.S. tech giants could be a hurdle to securing a trade deal, a source told the Telegraph.

The tax will apply to companies that are profitable and generating at least £500 million a year in global revenues. The tax is expected to take effect April 2020.

The Office of the U.S. Trade Representative is also investigating France's plans for a 3% tax on tech giants such as Apple Inc., Amazon.com Inc., Facebook Inc. and Google LLC parent company Alphabet Inc., alleging that such a measure unfairly targets U.S. companies.