Elon Musk’s X stands to benefit financially if the government pulls an £800m tax on US tech firms as part of an economic deal with Donald Trump, as a prominent tax campaigner indicated the social media platform qualifies for the levy.
Dan Neidle, the head of the non-profit organisation Tax Policy Associates, said the social media platform was eligible for the digital services tax, which is on the block in negotiations between the US and the UK.
“Technically it’s fairly clear X should pay the DST,” he said.
Ministers have been discussing dropping the DST as part of negotiations with the US in exchange for the Trump administration granting the UK a carve-out from tariffs which would otherwise be levied on 2 April.
The technology secretary, Peter Kyle, said on Monday that “nothing was off the table” when it comes to the tax, which was first imposed by the Conservatives in 2020 to stop international technology companies avoiding tax by hiding their profits offshore.
Kyle told the Politico Tech podcast: “We are exploring all of the things that both territories, the United Kingdom and the US, either are concerned about or are excited about doing into the future.”
His comments add to similar remarks from the chancellor, Rachel Reeves, over the weekend. She told the BBC: “We’ve got to get the balance right, and those discussions at the moment are ongoing.”
Labour MPs have voiced their concern about the prospect of the government dropping the DST under pressure from the Trump administration. Rachael Maskell said this weekend: “I would be concerned if relief was granted in what would be seen as a dash to let the US tech companies off the hook, while at the same time as making disabled people pay for the revenue loss, with their lifelines being cut.”
Another Labour MP said: “This would be the very worst optics: dropping a tax on big tech companies in the same week we announce more departmental spending cuts and give the details about our welfare cuts.”
Reeves already faces political pressure over spending cuts to meet the government’s fiscal rules, including a £5bn welfare overhaul and 10,000 job losses in the civil service. Scores of Labour MPs voiced significant doubts about the government’s welfare changes in a tense meeting last week with the work and pensions secretary, Liz Kendall.
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The DST covers search engines, social media platforms and online marketplaces that cater for UK users. To come within scope, tech businesses need to generate more than £500m in worldwide revenues and more than £25m from UK users. If a company qualifies on that basis, their revenues from UK users are taxed at 2%.
According to X’s last published results for its UK operations, the company made revenues of £205m, putting it in line to pay the tax. A company’s first £25m of UK revenues are exempt from the tax, meaning X would theoretically have been in line to pay around £3.6m under the DST that year, but its results do not explicitly state that such a payment was made.
According to the National Audit Office, 90% of DST revenues in its first year of operation in 2020-21 came from five businesses. Amazon, Google, eBay and Apple have publicly acknowledged paying the tax, and Facebook’s parent, Meta, is widely presumed to have done so.
The tax is expected to raise £800m this year, rising to £1.1bn by the turn of the decade, according to the Office for Budget Responsibility.
Neidle said the DST was a “diplomatically complicated” tax, with the UK having pledged to abolish it when an internationally agreed tax regime for multinationals is introduced, brokered by the Organisation for Economic Co-operation and Development (OECD). Failure to introduce the so-called pillar 1 regime so far has left the OECD and DST “in a bit of a limbo”, he said.
