Digital Services Tax: The UK tax the US President is furious about

With all eyes on Parliament— currently convulsing over the latest revelations in the Mandelson scandal, a story itself about influence and the reach of wealth at the highest levels of government— you may have missed something else. Trump is once again threatening to “impose a big tariff on the UK” if we don’t hand his billionaire tech baron buddies another massive tax cut. Or as he puts it we “better be careful.”

Last year we won a major victory. It came, after thousands of you wrote to your MPs, after our Westminster advocacy team pushed relentlessly, and after we filled the airwaves with public outrage. In response the government announced it would keep the UK’s Digital Services Tax— a crucial levy designed to stop the pay‑what‑you‑like tax regime enjoyed by Big Tech, and one that had reportedly been on the chopping block. It was a major victory for people power, proof that organised public pressure can counter the influence of corporate lobbyists. But the President’s latest comments show the fight is far from over.

The Digital Services Tax (DST): the tiny tax, with a huge impact

Global giants like Amazon, Google and Meta are able to pay tiny amounts of tax by using clever international structures to move their profits around. That’s why the Digital Services Tax is so mighty. It is just a 2% levy on the very largest tech companies but crucially, it’s based on turnover, not profits— which is much harder to shift around. That’s why many of these firms pay more in the DST than they do in UK corporation tax.

HMRC recently confirmed that the DST raised £944 million last year alone. And our friends at Tax Watch estimate it should raise around £5.2 billion across the life of this Parliament — that’s enough to train 128,000 NHS nurses.

Yet despite clear public support— YouGov polling we commissioned last year showed not only that the public support the tax but that most want it raised— there has been serious talk of scrapping it. That’s because the U.S. President and an army of corporate lobbyists have been using their full repertoire of threats, bluster, and backroom pressure to try and rewrite our tax laws to protect the profits of a handful of mega‑corporations. The public weren’t buying it then, with 67% saying they want the UK to enforce its laws on Big Tech even if it strains relations with the U.S. President, and we’re sure they’re not buying it now.

A global pattern of pressure, and resistance

The UK isn’t alone in trying to take on multinational corporations ripping off the public. But when Poland announced plans for a 3% DST, their government was met with similar hectoring from the U.S. ambassador, using language that wouldn’t be out of place in an episode of The Sopranos; “President Trump will reciprocate as well he should. Rescind the tax to avoid the consequences!” But as reported this week, Poland’s Digitalisation Minister has stood firm. They will join the UK and around 25 other countries across Europe already using a DST.

DST laws at national level are helping to stop mega-corporations getting away with not paying their fair share. But as national laws, each is slightly different in terms of design and implementation, and the rates range from 1.5% Poland to 7.5% in Hungary.

The landmark 2021 OECD global tax agreement was meant to mark the beginning of a much more seismic and long-lasting fix. The crux of this agreement, to which the UK is also committed, is that multinationals will be forced to register profits where their sales are made, regardless of the physical presence. This is “Pillar 1” of the new agreement, and would mean no more could companies like Amazon gerrymander their business structures to register mega-profits in 10-person offices in Switzerland and Ireland, whilst somehow running practically non-profit £multi-billion-turnover organisations in the UK or France.

The DST was meant to be a temporary tax that will no longer be needed once this new international tax regime is finalised. But last November, those historic plans were dealt a serious blow when the UK signed up to a U.S. exemption from another crucial element of the OECD agreement; the Global Minimum Tax (a.k.a pillar 2)— a move that Tax Watch estimates will hand $40.5 billion in annual tax cuts to U.S. multinationals, including $6 billion to just six tech giants.

We don’t know how much this will cost the UK — because the government won’t release the impact assessments. They admit the documents exist, but won’t say whether they were written before or after signing the deal (we’re not sure which is worse), or how much we’re forecasted to give away. With the U.S. president and his Billionaire buddies looking to water down, carve out and blow up this deal, it is more important than ever that the UK holds the line on our DST.

How can we win a fairer future?

Unfortunately this is what happens when global tax policy is shaped in secretive OECD backrooms dominated by a handful of rich countries and corporate lobbyists. It’s why we’re campaigning for a UN tax convention: a more democratic, transparent way of setting global rules. It’s why we’re campaigning to kick big cash donations out of our politics: to guarantee our politicians are working for the majority and not the mega-rich minority. And why we’re campaigning to end UK tax havens that are central to facilitating tax dodging.

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