UK taxes on big tech firms may be changed as part of a deal to avoid US President Donald Trump’s next raft of tariffs, Chancellor Rachel Reeves has suggested.
She said talks are “ongoing” about tweaks to the Digital Services Tax (DST), which affects global tech giants like Amazon and Meta.
The 2% levy introduced in 2020 raises about £800m a year for the UK, but the BBC understands it could be altered in exchange for the US not imposing more import taxes on the UK, following the barrage of tariffs Trump has already announced.
The potential change was criticised by the Liberal Democrats, who said Labour is “at risk of losing its moral compass”.
Asked on BBC One’s Sunday with Laura Kuenssberg whether the UK would change the DST to save the UK from Trump’s tariffs, Reeves said: “We’ve got to get the balance right, and those discussions at the moment are ongoing.
“We want to make progress. We do not want to see British exporters subject to higher tariffs.”
She said it was the “right thing that companies who operate in the UK pay their taxes in the UK, and the US government and tech companies understand as well, but we are having discussions with the US at the moment. I want to preserve free and open trade.”
Trump has announced a host of tariffs on goods from other countries, including the UK, since the start of his presidency in January.
Tariffs are taxes charged on goods imported from other countries.
The companies that bring the foreign goods into the country pay the tax to the government.
He has delayed some of these tariffs and U-turned on others, but has pledged to announce a swathe of additional tariffs on 2 April, dubbed “Tariff Day” by some.
Trump believes the taxes will encourage US firms to buy from American suppliers and use American labour, but businesses argue this is unrealistic because they would need to overhaul their supply chains.
Reeves told the BBC the US is “rightly concerned about countries that have large and persistent trade surpluses with the US. The UK is not one of those countries. We have balanced trade between our countries”.
Liberal Democrats’ Treasury spokesperson Daisy Cooper said she was “deeply concerned that the government may even be considering reducing the digital services tax”.
“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, Zuckerberg, and other US tech barons, then the Labour government are at real risk of losing their moral compass,” she told the BBC.
The Liberal Democrats are pushing for the DST to be tripled to 6%.
