Chancellor Rachel Reeves is floating potential changes to its digital services tax to avoid being hit with further tariffs from the United States after making £5billion in benefit cuts.
The move comes as President Donald Trump is expected to announce new tariffs on April 2 that could impact British exporters, on top of the existing 25 per cent levy on steel and aluminium imports.
The digital services tax, which targets global tech giants, has been a point of contention in UK-US trade relations. Reeves indicated the Government is seeking to balance tax fairness with protecting British trade interests.
Under the digital services tax, approximately £800million was generated annually since its introduction in 2020. The tax specifically targets major technology companies including Meta, Google and Amazon.
The UK Government is floating a tax cut for tech giants
GETTY
Reports suggest the UK is considering altering the tax in exchange for exemption from duties Trump has threatened to impose on many of Britain's trading partners.
The Labour Government aims to ensure tech firms continue paying taxes where they operate while maintaining fair trade relations with the US.
Addressing the situation, Reeves said: "We need to get the balance right. We don't want British exporters facing higher tariffs." The Chancellor's comments come as President Trump is set to announce new tariffs on April 2.
The UK is reportedly considering modifying its digital services tax to secure exemption from these threatened duties. Labour officials have not ruled out changing the tax to secure favourable trade terms with the United States.
Do you have a money story you’d like to share? Get in touch by emailing money@gbnews.uk.
Labour minister Peter Kyle is leading the Government's efforts
PAGovernment ministers maintain it will continue ensuring tech companies pay appropriate taxes where they operate. The proposal has faced sharp criticism, particularly from Liberal Democrat leader Sir Ed Davey.
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".
Furthermore, the Liberal Democrat leader expressed concern that Labour's approach could undermine the UK's financial independence going forward.
"Now Labour's even talking about scrapping Britain's tax on social media giants," he added.
Business Secretary Jonathan Reynolds has been in Washington this week discussing trade issues with US officials.
LATEST DEVELOPMENTS:
Chancellor Rachel Reeves is looking for ways to get more investment in the UK
PAMeanwhile, Tech Secretary Peter Kyle has also been in the United States.
Kyle has been promoting the UK as a hub for artificial intelligence investment.
The opposition contends that compromising on the digital services tax could result in long-term damage to UK interests.
Rachel Reeves will outline her tax and fiscal agenda during the Spring Statement on March 26.
