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Reading: Labour unease builds over recommendations ministers may axe digital tax on tech giants
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Michigan Post > Blog > Business > Labour unease builds over recommendations ministers may axe digital tax on tech giants
Business

Labour unease builds over recommendations ministers may axe digital tax on tech giants

By Editorial Board Published March 27, 2025 5 Min Read
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Labour unease builds over recommendations ministers may axe digital tax on tech giants

Labour MPs have expressed concern about potential plans to chop or scrap a tax paid by tech giants to stave off the specter of Donald Trump’s tariffs.

The chancellor and enterprise secretary have each left the door open to probably abolishing the two% levy on the net revenues made within the UK by firms together with Fb, Google, and Amazon.

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The thought has been mooted as a method to keep away from additional tariffs from Mr Trump, who has introduced in 25% taxes on metal and aluminium imports and signed one other govt order yesterday that can have an effect on vehicles.

Nonetheless, numerous Labour MPs have raised considerations concerning the optics of lowering or abandoning the tax whereas chopping advantages for sick and disabled individuals, because the chancellor confirmed yesterday in her spring assertion.

“We are rolling out the red carpet for these tech companies, and we are not getting much in return,” he stated.

“If you are going to give tax cuts to some of wealthiest corporations on the planet just as you have taken billions from welfare – how do you think that is going to look to the public? It’s going to look absolutely horrific.”

He added: “I understand the argument of hugging America close – but this is not the way to do it.”

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3:59

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‘We ought to be maximising it’

One other Labour MP argued there was “little appetite in the parliamentary party for any reneging on the digital services tax”.

“As a new revenue line to government at such difficult times, if anything we should be maximising it not minimising it,” they added.

A 3rd backbencher stated: “Unless part of a wider US trade deal that eliminates tariffs and delivers a net boost to the economy – which is more than the revenue of that tax – changing the digital services tax should not be considered.”

‘Slam dunk’

Nonetheless, some consultants have urged axing the tax may finally repay it means the US leaves the UK out of its tariff regime or a useful commerce deal is struck.

Tax skilled Dan Neidle branded the tax “unprincipled”, because it raises lower than £1bn.

“If the government can negotiate more than £1bn in benefits from the US, then it’s a slam dunk,” he stated.

Ministers have to this point not dedicated to altering the tax however have left the door open to doing in order the federal government seeks to strike a beneficial commerce take care of the US.

Whereas particulars of what might be included within the deal – mooted by Keir Starmer and Mr Trump throughout their assembly in Washington final month – stay mild, AI and know-how may kind a part of it.

Bloomberg just lately reported the UK has informed the US it may change into a European hub for American firms’ knowledge centres, outdoors EU regulation.

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Mark Stone

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Final week, Rachel Reeves didn’t rule out altering the digital companies tax in change for exemptions from US tariffs, telling the BBC: “We’ve got to get the balance right, and those discussions at the moment are ongoing.

“We need to make progress. We don’t need to see British exporters topic to larger tariffs.”

She was echoed by Business Secretary Jonathan Reynolds, who said today the tax “was not one thing that may by no means change”.

He pointed to the very fact the tax was launched as a brief measure, introduced in by Rishi Sunak over considerations multinational tech giants creating wealth within the UK have been shifting their earnings abroad.

The UK was because of section out the tax three years in the past, however this has not but occurred.

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