The UK government is exploring potential adjustments to its digital services tax (DST) to avert further tariffs from the US, Rachel Reeves confirmed.
The DST, which targets global tech heavyweights like Meta, Google and Amazon, has raised around £800m a year since its introduction in 2020.
Yet, with President Donald Trump set to announce new tariffs on the 2nd April, the UK is reportedly mulling changing the tax in exchange for a carve out from the duties Trump had threatened to impose on most of the UK’s trading partners.
Addressing the situation, Reeves said: “We need to get the balance right. We don’t want British exporters facing higher tariffs.”
She also said that the UK would continue to make sure tech firms pay taxes where they operate, while aiming to maintain fair trade relations with the US.
Yet, the proposal faced sharp criticism.
Liberal Democrat leader Sir Ed Davey condemned the idea of hanging UK tax policy to placate Trump.
Speaking at his party’s spring conference in Harrogate, Davey warned: “Changing the UK’s tax policy to appease Donald Trump and Elon Musk is a dangerous path. Appeasement never works with bullies, and it doesn’t work with Trump. Look at what he’s already done with British steel tariffs”.
His comments reflect growing concern that Labour’s approach to Trump could undermine the UK’s ability to assert its financial independence.
“Now Labour’s even talking about scrapping Britain’s tax on social media giants”, he added.
While Labour officials, including Reeves, have not ruled out changing the DST to secure favourable trade terms, the opposition argues that such concessions could lead to long term harm.
Business secretary Jonathan Reynolds has been in Washington this week discussing trade issues, while tech secretary Peter Kyle has also been in the US, promoting the UK as a hub for AI investment.
