Rachel Reeves is considering caving into Donald Trump before he begins a trade war with Britain, with an anti-US ‘tech tax’ in her sights for a potential review.
American tech giants are currently clobbered with a 2% Digital Services Tax, generating around £678 million a year.
It’s now reported Ms Reeves is planning on a major review of the tax, preempting intense pressure from the US president.
Online giants like Amazon, Apple and Google, the CEOs of whom were at President’ Trump’s inauguration last months, would all set to benefit from any reduction in the tax.
While Donald Trump is yet to threaten the UK with any tariffs, unlike Mexico, Canada, China and the EU, he said yesterday that Britain is “out of line” on trade.
Trade experts now warn President Trump will put huge pressure on Britain over the Digital Services Tax (DST), with demands for concessions and relief.
John Denton at the International Chamber of Commerce said: “I think there will be a lot of pressure put on the UK on this particular issue.”
The director general of the Institute of Export and International Trade, added: “The sense that US-based businesses, particularly the so-called tech bros, are being targeted specifically is something that he’s seemingly not willing to accept.”
“He’s absolutely trying to create the freest, low-tax opportunity for those businesses as possible.”
A former director of the OECD’s centre for tax policy also warned: “The Trump administration will indeed take sanctions against countries that have enacted DSTs.”
Yesterday Keir Starmer insisted he wants “open and strong” trade with the US.
However while Britain remains out of the firing line for the moment, Nigel Farage told the Telegraph that his friend will “fight hard for US tech”, with Elon Musk piling on particular pressure.
Mr Farage explained: “Clearly, the UK has got to make some decisions about its competitive position with regards to American tech and the EU as well.”
“[DSTs] are something that gets talked about and Trump will stand up and fight for American companies.”
Speaking in Brussels yesterday, Sir Keir Starmer refused to side with either Europe or Washington over the newly-sparked trade war.
Sir Keir said it is not an “either/or” question, adding: “In relation to the US and the EU, or Europe more generally, if you look at our vital interests, it’s really important we work with both and don’t see it as either/or,”
“When it comes to trade, we have a huge amount of trade between the US and UK, and that’s why it’s important that I act in the national interest, the best interest of the UK as we stay resolute in saying it’s important we work with both sets of partners.”
Late last night President Trump paused his planned 25% tariffs on Canada for 30 days, though 10% tariffs on China were activated this morning.
