The UK government is considering changes to its Digital Services Tax (DST) as part of negotiations with the United States to prevent additional tariffs on British exports, Chancellor Rachel Reeves has suggested.
Discussions are ongoing about potential adjustments to the DST, a 2% levy introduced in 2020 that targets global tech firms such as Amazon and Meta. The tax raises approximately £800 million annually for the UK. However, it may be revised to deter further import tariffs from US President Donald Trump, following previous trade restrictions imposed by his administration.
Speaking on BBC One’s Sunday with Laura Kuenssberg, Reeves acknowledged that negotiations were underway. “We’ve got to get the balance right, and those discussions at the moment are ongoing,” she said. “We want to make progress. We do not want to see British exporters subject to higher tariffs.”
Reeves defended the principle of taxing large multinational firms operating in the UK but signaled a willingness to engage in talks with the US to maintain free and open trade. “It is right that companies operating in the UK pay their taxes here,” she stated. “The US government and tech companies understand this, but we are having discussions to find a solution.”
Since taking office in January, President Trump has implemented a series of tariffs on goods from various countries, including the UK. While some tariffs have been postponed or reversed, he is expected to announce additional measures on April 2, which some have dubbed “Tariff Day.” The US administration argues that these tariffs will incentivize domestic firms to source goods and labor within the US. However, businesses warn that such changes could disrupt supply chains and increase costs.
Reeves highlighted that the UK does not maintain a large or persistent trade surplus with the US and should not be a target for punitive tariffs. “The US is rightly concerned about countries with significant trade surpluses. The UK is not one of those countries. We have balanced trade between our nations,” she asserted.
The prospect of altering the DST has drawn criticism from opposition parties. Liberal Democrats’ Treasury spokesperson Daisy Cooper expressed strong opposition, warning that potential reductions in the DST could benefit US tech giants at the expense of essential public services.
“If the government is seriously talking about putting savage cuts in place that will affect disabled people while also giving a tax handout to Elon Musk, Mark Zuckerberg, and other US tech barons, then the Labour government is at real risk of losing its moral compass,” Cooper told the BBC.
The Liberal Democrats are advocating for the DST to be tripled to 6%, arguing that tech firms should contribute more to public finances.
With trade relations between the UK and US under scrutiny, the outcome of these negotiations could have significant economic implications for British businesses and taxpayers alike.
