The UK risks losing billions in revenue if it bows to US pressure to abolish the Digital Services Tax (DST). This is according to a new analysis by the thinktank TaxWatch. The warning comes ahead of Trump’s state visit to the UK next week, where the Labour Party government is seeking a technology partnership with the president. It follows renewed tariff threats from Trump against countries who maintain digital taxes. At the same time, the government faces mounting pressure to plug gaps in public finances, with borrowing costs at a 27-year high.
Trump to call for the UK to abolish Digital Services Tax on Big Tech
TaxWatch UK has projected that the DST – a 2% levy on revenues from large digital platforms including search engines, social media and online marketplaces – will generate £4.4bn-£5.2bn between 2024 and 2029. This is broadly comparable to funding the cost of training between 108,000-128,000 new nurses (25-29% of the current NHS nurse workforce). The report warns that DST receipts are only set to grow, making the DST an increasingly important part of the UK’s business tax base.
For Big Tech, these sums are small. Amazon alone recently reported £29bn in UK revenues in 2024, equivalent to over £900 every second. Yet, it refused to disclose how much profit it made in the UK, prompting renewed criticism over transparency.
Meanwhile, new polling commissioned by Tax Justice UK and conducted by YouGov suggests public opinion is firmly against Big Tech concessions:
- Two thirds (67%) want the UK to enforce its laws on Big Tech even if it strains relations with Trump. This rises to 79% among those who voted Labour last election.
- Almost half (45%) said UK enforcement of laws addressing the influence and power of Big Tech companies is too relaxed. Only 6% thought the opposite.
- Half (51%) of respondents said the current 2% DST rate is too low.
- On including the DST in trade negotiations, 45% were unsure. However, among those with a view, nearly two-thirds (64%) opposed using the tax as a bargaining chip.
Trump threatening new tariffs
The findings come as Trump threatens new tariffs, claiming – along with the US tech industry – that the DST wholly or mainly targets US firms. Freedom of Information (FOI) data recently obtained by TaxWatch directly challenges this. HMRC data showed that 37% of multinationals it assessed as liable are not US-headquartered. In 2023/24 (latest year figures available), 34% of those filing returns and 28% of those paying liabilities were non-US.
Commenting on the findings, the Liberal Democrat’s science and technology spokesperson and MP for Harpenden & Berkhamsted Victoria Collins said:
This analysis makes clear what we’ve all been saying for a long time: scrapping the Digital Services Tax to appease Trump and his cronies would be a monumental mistake. The public knows that tech giants need to pay their fair share, so the government needs to make that happen.
GMB senior organiser Amanda Gearing said:
Big tech firms have a long and checkered history when it comes to doing the right thing by the British tax paying public. Meanwhile companies like Amazon have spent millions and used dirty tricks to deny union recognition to their workers here in the UK. Government should be putting working people first, not rewarding overseas tech billionaires by scrapping one of the few taxes they have to pay.
Platforms building harmful monopolies – make them pay their fair share
Legal consultant and member of Patriotic Millionaires UK Stephen Kinsella said:
As someone with extensive experience in competition law who now advocates for a fairer online environment and more robust taxation of the wealthy, I’ve seen how these platforms build harmful monopolies while systematically avoiding even minimal tax.
The 2% DST isn’t punitive – it’s a modest first step toward making these companies pay their fair share. If the government abandons it now, it’s essentially telling the world that Britain’s tax sovereignty is for sale to aggressive foreign interests.
Executive director at Tax Justice UK Faiza Shaheen said:
Our government needs to be clear that any cuts to the Digital Services Tax are not on the negotiating table. Millions are struggling with affording the basics; public services including hospitals and schools need more funding to deliver what the country needs; and the Chancellor is scrambling around to fill a reported financial black hole.
The public are right to think that the government must hold their position on this. Our tax system is asking too much of everyday people and small businesses – if anything, big corporations like Amazon and Google should be paying more.
Featured image via the Canary
By The Canary
This post was originally published on Canary.