The UK government is considering eliminating its digital services tax, which could amount to around £800 million annually, as part of a potential trade deal with the United States. This was revealed in a recent BBC interview with Chancellor Rachel Reeves.
During the interview, Chancellor Reeves confirmed that the government is currently in discussions with the US administration concerning the future of the tax. Former US President Donald Trump has previously criticized the tax, referring to it as an unfair trade practice. Trump has indicated that the US would respond with tariffs, which are expected to be announced in the coming month.
Reeves stated that the digital services tax might be abolished as part of wider trade negotiations with the US. “We’re in discussions at the moment around a whole range of things around tariffs with the United States,” she stated. She further added, “We will continue to operate on that principle, that you should pay taxes in the country in which you operate, and that’s really important for UK-based businesses as well, that they don’t face an unfair disadvantage from companies that aren’t paying their taxes in Britain.”
The digital services tax was originally implemented by the Conservative government in April 2020. The aim of the tax was to ensure that global digital firms pay taxes that reflect the revenue they generate from British customers. The tax is set at two percent and targets businesses with global revenues exceeding £500 million. It specifically affects major US tech companies, including Alphabet, Meta, and Amazon.
