US tariffs: Trade secretary won’t rule out cuts to digital services tax
Jonathan Reynolds has refused to rule out cutting the digital services tax on major tech firms, amid the prospect of looming US trade tariffs.
The business and trade secretary insisted the UK government was “committed to ensuring tech companies pay a fair amount of tax in the UK”, but added that the digital services tax was “not something that can never change”.
It comes amid media reports suggesting the government is considering changes to the digital services tax as it bids to avoid the tariffs US President Donald Trump is expected to introduce next week.
Tech firms are obligated to pay a two per cent levy under the tax, which includes major US firms such as Amazon, and brings in around £800m in revenue each year.
Speaking at a trade conference at the Chatham House think tank, Reynolds suggested UK ministers were willing to discuss the issue with their US counterparts.
“We have always been of the view as a country that this has to be something ideally agreed on an international basis, but it’s not that digital services tax has been put in place as something that can never change or we can never have a conversation about it,” he told the audience.
Reynolds stressed that the UK was “committed to making sure tech companies pay a fair amount of tax in the UK”.
He added that the US had expressed “concerns about the specific structure of that”, but said it was not “a major part of the conversation” on tariffs.
‘Running commentary’
Asked about Reynolds’ comments, Downing Street declined to comment on the talks.
Asked if changing the tax was part of ongoing trade talks with the US, a No10 spokesman said: “We’re not going to provide a running commentary on the details of trade talks.”
He added: “We’re just not going to comment on every aspect of the trade talks as they continue.”
Digital services tax was introduced in 2020 in what was intended as a temporary move prior to an international agreement on digital taxation.
Meanwhile, the Liberal Democrats have urged the government to rule out cutting or abolishing the tax, with deputy leader Daisy Cooper saying it would be “unforgivable” to “go ahead with cutting taxes for US tech barons to appease Musk and Trump”.
Cooper argued scrapping the tax would cost £5bn over the next five years, and said: “Ministers need to confirm that they won’t bow down to Trump’s threats… the Chancellor needs to categorically rule out cutting the digital services tax in any way.”
Trump announced 25 per cent tariffs on car imports to the US on Wednesday night, due to come in on 2 April when he is also reported to be planning to impose a series of other tariffs.
The government has said talks are still ongoing as the UK attempts to secure exemptions from the tariffs, which the watchdog the Office for Budget Responsibility (OBR) has forecast could knock as much as one per cent off the UK’s GDP.
Tariffs exemption?
Duncan Edwards, chief executive of the organisation, a transatlantic trade organisation, said while the new tariffs were a “clear campaign promise” and “should not come as a surprise”, there was a “very strong case” for UK exemption.
He said: “Unlike other trading relationships, the US and UK do not have a trade imbalance, nor is there a significant disparity in wage structures or labour standards.
“We urge the UK not to retaliate, listen carefully to the American concerns, and continue efforts to reach an agreement which provides the exemption that will benefit both economies.”
While Chris Southworth, secretary general of the International Chamber of Commerce UK, said: “I think in the last 24 hours, this has been a perfect illustration of the challenges facing the UK and the world that we’re living in.
“Yesterday, we had the spring statement that didn’t mention anything about trade. Within 24 hours, we then have 25 per cent tariffs from the Trump administration.
“It just demonstrates the strains that businesses are under and the impact that has on our economy.”