Tech tax was never set in stone, says Britain’s trade chief as Trump tariffs loom

LONDON — The U.K.’s digital services tax (DST) was never set in stone, Trade Secretary Jonathan Reynolds said Wednesday, raising the prospect that Britain could pare back the levy to avoid looming U.S. tariffs.

“We’ve always been of the view as a country that this has to be something ideally agreed on an international basis,” Reynolds said at the Chatham House Global Trade Conference in London. “But it’s not that DST has been put in place as something [that] can never change or that we can never have a conversation about it.” 

The U.K. is racing to strike a trade deal with Washington ahead of April 2, when President Donald Trump’s reciprocal tariffs will be unveiled. The U.S. has long expressed displeasure with Britain’s 2 percent tax on tech giants, arguing it unfairly targets U.S. firms. 

But scrapping the tax would create a hole in Chancellor Rachel Reeves’ spending plans, as it’s expected to raise £800 million this year.

“We are both committed to making sure tech companies pay a fair rate of tax in the U.K … but we understand the U.S. has cited, as it has to countries around the world, concerns about the specific structure,” said Reynolds. 

In January Trump’s administration withdrew from an international effort to negotiate a tech tax deal under the auspices of the Paris-based OECD.

As for a broader trade deal between the U.S. and U.K., Reynolds was cautiously optimistic. “It’s challenging, there’s no way to avoid saying that,” he said. “Particularly, our view would have been that we would not have any tariff applied to the U.K … we’re continuing an incredibly intensive set of negotiations and we will know pretty soon what the outcome [will be].”