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The U.K. is planning to keep its digital services tax, a person familiar with the matter said, after Prime Minister Mark Carney scrapped Canada’s levy to restart trade talks with President Donald Trump’s administration.
The U.S. wanted Britain to drop the tax as part of trade talks between the two countries and Prime Minister Keir Starmer’s government had been considering making changes, but the prospect isn’t on the table and hasn’t been for some time, according to the person, who spoke on condition of anonymity.
The levy, which is charged at 2% on the revenue derived from U.K. users of search engines, social media companies and online marketplaces, is unpopular with American firms such as Google parent Alphabet Inc., Facebook and Instagram owner Meta Platforms Inc., and Amazon.com Inc.
Amazon.com Inc. ranks No. 1 on the Transport Topics Top 100 list of the largest logistics carriers in North America, No. 12 on the TT100 list of the largest private carriers and No. 1 on the Top 50 Global Freight list.
Canada is engaged in complex negotiations on a new economic and security partnership with the U.S.
Rescinding the DST will allow the negotiations to make vital progress and reinforce our work to create jobs and build prosperity for all Canadians.
🔗https://t.co/hsiDxk7JVD
— François-Philippe Champagne (FPC) 🇨🇦 (@FP_Champagne) June 30, 2025
Tech taxes have come back into focus after Trump said last week he was ending all trade discussions with Canada in retaliation for their digital tax, which was passed into law last year by the previous government of former Prime Minister Justin Trudeau. Canada’s finance minister, Francois-Philippe Champagne, said late June 29 he hoped rescinding the DST would allow trade talks with the U.S. to make “vital progress.”
The U.K. was the first country to sign a tariff-cutting deal with the U.S. in May, which reduced tariffs facing automakers and the steel industry, though the steel provisions are still subject to further negotiation and the U.S.’s broader 10% baseline tariffs largely remain in place. A delegation of U.K. officials is in the U.S. this week to progress the steel talks, according to a separate person familiar with the matter.
When the U.K.-U.S. deal was signed, the U.S. said it was “disappointed that the U.K. was unwilling to fully address its discriminatory digital services tax.” It called the levy “discriminatory, unjustified” and said it should be “removed promptly.”
For its part, the U.K. did not make reference to the digital services tax when the U.S. deal was announced. The text of the U.K.-U.S. deal said the two countries would continue “discussions towards a transformative technology partnership,” without giving further details. When asked about the DST after the agreement was unveiled, Starmer said the deal didn’t cover it.
“We have a trade deal with the U.S.,” Starmer’s deputy spokesman, Tom Wells, told reporters on June 30, when asked if changes to the so-called tech tax were still in prospect. “Our position on the digital services tax is unchanged.”
The money raised by the levy — expected to be about$1.1 billion this year — is increasingly important to Chancellor of the Exchequer Rachel Reeves after a series of recent policy U-turns that have set back the government’s finances.
Reeves is widely expected to have to increase taxes at her autumn budget to address a fiscal shortfall left by watering down welfare reforms, reversing cuts to winter fuel payments for pensioners and taking a hit from a predicted downgrade in estimates for U.K. productivity.
