Prime Minister Sir Keir Starmer confirmed ongoing talks with the United States over digital services. This follows a new trade agreement with President Trump, which reduced tariffs on UK steel, aluminium, and cars.
The UK’s 2% Digital Services Tax (DST), raising around £800 million annually—mostly from major US tech firms—remains unchanged. However, speculation continues over its future in wider UK-US trade talks.
Speaking aboard HMS St Albans during a Norway visit, Starmer said the deal primarily reduced tariffs in key manufacturing industries. He added that the DST was not part of the agreement but discussions on it are still ongoing.
The DST, introduced in 2020 by the previous Conservative government, targets global tech giants like Amazon and Meta. It applies to firms earning more than £500 million globally and £25 million in the UK, particularly those operating search engines, online marketplaces, or social media platforms.
President Trump has strongly criticised the DST, arguing it unfairly targets American companies. The issue has remained a point of friction throughout ongoing UK-US trade negotiations.
Chancellor Rachel Reeves has defended the DST, insisting that companies operating in the UK should pay their fair share of tax. She also emphasised the need to maintain open and fair trade relationships.
The Liberal Democrats warned that any attempt to weaken or scrap the DST could damage Labour’s credibility on fair taxation. They believe surrendering to US pressure would risk the party’s moral standing.
Trade Minister Douglas Alexander told MPs that the government remains committed to protecting online safety while promoting national trade interests.
Conservative leader Kemi Badenoch criticised the agreement, calling it “better than nothing” and accused Labour of abandoning the goal of a full UK-US free trade deal.
Despite criticism, the UK government says it will continue negotiations with US officials on digital services and broader trade matters.
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