UK taxation on major technology companies could see adjustments as part of a negotiation to prevent US President Donald Trump’s forthcoming series of tariffs, suggested Chancellor Rachel Reeves.
She noted that discussions are “ongoing” regarding modifications to the Digital Services Tax (DST), which impacts global tech giants such as Amazon and Meta.
This 2% tax, which was implemented in 2020, generates approximately £800 million annually for the UK. However, the BBC reports that it may be adjusted in return for the US refraining from enacting additional import duties on the UK, in light of the series of tariffs Trump has already declared.
This potential change has drawn criticism from the Liberal Democrats, who argue that Labour risks “losing its moral compass.”
When asked on BBC One’s Sunday with Laura Kuenssberg if the UK might alter the DST to protect itself from Trump’s tariffs, Reeves responded: “We need to find the right balance, and those discussions are currently ongoing.
“We are eager to make progress and do not want British exporters facing increased tariffs.”
She emphasized it is important that companies operating in the UK pay their taxes here, which both the US government and tech firms recognize. “We are engaged in talks with the US at this time, as I aim to maintain free and open trade.”
Since taking office in January, Trump has introduced numerous tariffs on commodities from abroad, including from the UK.
Tariffs are imposed taxes on goods imported from other nations.
The companies that import these foreign products are responsible for paying the tax to the government.
Though he has postponed some of these tariffs and reversed positions on others, Trump has confirmed he will unveil a range of additional tariffs on April 2, an event some are calling “Tariff Day.”
Trump maintains that these taxes will motivate US businesses to procure from domestic sources and employ American workers, yet corporations argue that this is impractical due to the need to revamp their supply chains.
Reeves informed the BBC that the US is “correctly worried about nations with significant and consistent trade surpluses with the US,” adding, “The UK is not among those countries. We have balanced trade relations.”
Liberal Democrats’ spokesperson on Treasury matters, Daisy Cooper, expressed her “deep concern” that the government might be contemplating lowering the digital services tax.
“If the government is seriously discussing imposing severe cuts that will impact disabled individuals while simultaneously providing handouts to Elon Musk, Zuckerberg, and other American tech moguls, then the Labour government risks losing its moral direction,” she told the BBC.
The Liberal Democrats are advocating for an increase in the DST to 6%.
