U.K. Tech Secretary Peter Kyle told POLITICO that “nothing is off the table” as Donald Trump’s administration urges the U.K. to roll back its digital services tax (DST) during trade talks.
The U.K. is racing to strike a pact with the White House before a new tranche of “reciprocal” trade tariffs come into effect on April 2. U.S. officials have said that at least 100 countries might be spared the extra duties.
The U.S. has expressed particular displeasure with the DST, which exacts a 2 percent levy on tech giants. Trump name-checked the tax in a February memorandum entitled: “Defending American Companies and Innovators From Overseas Extortion and Unfair Fines and Penalties.”
Asked if the U.K.’s 2 percent levy is on the table during the negotiations, Tech Secretary Peter Kyle told the POLITICO Tech podcast: “Well, we are exploring all of the things that both territories, the United Kingdom and the U.S., either are concerned about or are excited about doing into the future.”
He added: “Nothing is off the table at this point.”
But such a move would create a hole in Chancellor Rachel Reeves’ already-stretched government spending plans. When asked by the BBC’s Laura Kuenssberg on Sunday about whether the government might tweak or even ditch the DST as a way to avoid U.S. tariffs, Reeves said that companies operating in the U.K. need to pay U.K. taxes — but didn’t rule out such a move.
“We’ve got to get the balance right, and those discussions at the moment are ongoing,” she said. The tax is currently expected to raise £800 million this year.
Tech industry figures privately hope the U.K. will drop the tax in order to strike a deal with the White House.
But taking a softer line on Big Tech is politically challenging for No. 10, particularly after bringing in a host of welfare cuts. Centrist opposition party the Liberal Democrats released a statement after Reeves’ appearance on Kuenssberg warning: “if the government goes ahead with slashing taxes for the social media giants whilst cutting welfare for millions of the most vulnerable, it would be tantamount to robbing disabled people to appease Musk and Trump.”
Some Labour MPs are already voicing discontent. Rachael Maskell MP told The Guardian: “I would be concerned if relief was granted in what would be seen as a dash to let the U.S. tech companies off the hook, while at the same time as making disabled people pay for the revenue loss, with their lifelines being cut.” Clive Lewis MP called it “extractive politics at its worst.”
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