UK Government Faces Pressure to Defend Digital Services Tax Amid Trump Tariff Threats
AI-generated image · US National Wire
Campaigners warn Prime Minister Andy Burnham against scrapping the tech levy to appease the US administration ahead of a New York summit.
Prime Minister Andy Burnham is facing calls from civil society organizations to maintain the United Kingdom's Digital Services Tax (DST) as he prepares for a face-to-face meeting with US President Donald Trump in New York, as first reported by The Register.
President Trump has characterized the DST as a European levy that establishes unfair trade barriers for American firms. The Register reports that Trump has threatened the UK with a "big tariff" if the government refuses to scrap the tax.
Introduced in 2020, the DST targets search engines, online marketplaces, and social media services. The tax applies a 2 percent levy on revenues from UK users for groups that generate over £500 million globally from these activities and more than £25 million from UK users, though the first £25 million of UK revenue is exempt. The UK government originally implemented the tax to address a mismatch between where digital companies generate value and where their profits are taxed. The Register notes that the DST is separate from corporation tax.
Companies within the scope of the tax include Meta, Google, Amazon, TikTok, and eBay. In the 2024-25 period, the tax generated £800 million in revenue. The Register reports that scrapping the levy would result in a loss of revenue occurring just before Chancellor John Healey's first Budget, at a time when government borrowing is increasing.
In a letter addressed to Prime Minister Burnham and Chancellor Healey, several organizations—including Global Witness, 38 Degrees, Cost of Living Action, the National Education Union, and Tax Justice UK—urged the government to resist US pressure. The signatories are calling for the DST to be maintained and expanded to include other digital services and AI companies. They are also seeking measures to stop multinational corporations from shifting profits into low-tax jurisdictions.
Faiza Shaheen, the executive director of Tax Justice UK, stated that the UK should not cut taxes for wealthy corporations to please Donald Trump, noting that some of these businesses are monopolies with power and wealth exceeding that of entire nations. Shaheen argued that the government should instead strengthen the DST to include AI companies and use the resulting revenue to alleviate the cost of living for British citizens.