The government could scrap a tax of around £800 million per year on US tech firms as part of a trade deal according to a BBC interview with chancellor Rachel Reeves.

In the interview, Reeves confirmed that the government was in talks with the US administration about the future of the tax.

Trump has cited the so-called digital services tax as an example of unfair trade practices against which he is determined to respond with tariffs, which are due to be announced at the start of next month.

In the interview, Reeves said that the tax could be abolished as a part of a broader trade agreement with the US.

“We’re in discussions at the moment around a whole range of things around tariffs with the United States,” she told the BBC. “We will continue to operate on that principle, that you should pay taxes in the country in which you operate, and that’s really important for UK-based businesses as well, that they don’t face an unfair disadvantage from companies that aren’t paying their taxes in Britain.”

The tax was introduced by the Conservative government in April 2020 to ensure that global digital firms paid tax to reflect the money that they made from British customers.

The tax of two per cent is applied to businesses which have global revenues exceeding £500 million and affects US companies including Alphabet, Meta and Amazon.

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