UK considers large tech tax modifications to appease Donald Trump

UK taxes on large tech companies could also be modified as a part of a deal to keep away from US President Donald Trump’s subsequent raft of tariffs, Chancellor Rachel Reeves has instructed.

She mentioned talks are “ongoing” about tweaks to the Digital Providers Tax (DST), which impacts international tech giants like Amazon and Meta.

The two% levy launched in 2020 raises about £800m a 12 months for the UK, however the BBC understands it might be altered in change for the US not imposing extra import taxes on the UK, following the barrage of tariffs Trump has already introduced.

The potential change was criticised by the Liberal Democrats, who mentioned Labour is “prone to shedding its ethical compass”.

Requested on BBC One’s Sunday with Laura Kuenssberg whether or not the UK would change the DST to avoid wasting the UK from Trump’s tariffs, Reeves mentioned: “We have to get the steadiness proper, and people discussions for the time being are ongoing.

“We need to make progress. We don’t need to see British exporters topic to larger tariffs.”

She mentioned it was the “proper factor that corporations who function within the UK pay their taxes within the UK, and the US authorities and tech corporations perceive as properly, however we’re having discussions with the US for the time being. I need to protect free and open commerce.”

Trump has introduced a bunch of tariffs on items from different international locations, together with the UK, for the reason that begin of his presidency in January.

Tariffs are taxes charged on items imported from different international locations.

The businesses that deliver the international items into the nation pay the tax to the federal government.

He has delayed a few of these tariffs and U-turned on others, however has pledged to announce a swathe of extra tariffs on 2 April, dubbed “Tariff Day” by some.

Trump believes the taxes will encourage US companies to purchase from American suppliers and use American labour, however companies argue that is unrealistic as a result of they would wish to overtake their provide chains.

Reeves informed the BBC the US is “rightly involved about international locations which have giant and chronic commerce surpluses with the US. The UK shouldn’t be a kind of international locations. Now we have balanced commerce between our international locations”.

Liberal Democrats’ Treasury spokesperson Daisy Cooper mentioned she was “deeply involved that the federal government could even be contemplating lowering the digital providers tax”.

“If the federal government is critically speaking about placing savage cuts in place that can have an effect on disabled individuals whereas additionally giving a tax handout to Elon Musk, Zuckerberg, and different US tech barons, then the Labour authorities are at actual threat of shedding their ethical compass,” she informed the BBC.

The Liberal Democrats are pushing for the DST to be tripled to six%.