Speeding up trade talks with the UK and US... Dilemma amid financial difficulties and Trump considerations

'Big Tech Discrimination' Criticized by Trump
UK Likely to Revise Digital Services Tax System
Starmer Faces Dilemma Amid Revenue Shortfall

On July 5 last year, Keir Starmer, then leader of the UK Labour Party, gave a victory speech for the general election on the 5th (local time) at the Tate Modern art museum in London. The UK Prime Minister's Office announced on the 24th that Prime Minister Starmer had a phone call with US President Donald Trump regarding progress in trade negotiations between the US and the UK. / Reuters·Yonhap News

As the UK embarks on fiscal tightening and accelerates trade negotiations with the United States, it is expected to revise the 'digital services tax' criticized by US President Donald Trump. This is interpreted as an effort to align with the 'Trump code' to avoid a 'tariff bomb.' However, with cuts to disability welfare services and even public sector layoffs, every penny of revenue is precious, deepening the concerns of UK Prime Minister Keir Starmer.

The UK Prime Minister's Office announced on the 24th (local time) that Prime Minister Starmer spoke by phone with President Trump regarding progress in US-UK trade negotiations. A spokesperson for the Prime Minister's Office said the two leaders spoke late in the afternoon the previous day and "briefly discussed the progress made concerning the economic prosperity agreement."

According to US Reuters and AFP news agencies, the agreement currently under discussion between the two countries is centered on technology and artificial intelligence (AI) and is estimated to be smaller in scale than a free trade agreement (FTA). Previously, the UK pursued an FTA with the United States after leaving the European Union (EU), but it fell through.

In this process, there are also expectations that the UK, urgently needing trade negotiations with the US, will reform the digital services tax system criticized by President Trump. Local UK media reported that the UK government is considering reducing or abolishing the digital services tax.

The digital services tax, introduced in 2020, imposes a 2% tax on the revenue generated by internet companies from UK users. President Trump had warned of retaliatory measures, claiming that digital services taxes imposed by countries worldwide discriminate against US tech giants (Big Tech).

The problem is that the UK is currently experiencing a severe fiscal crisis. Reducing the digital services tax could exacerbate financial difficulties. In fact, it is estimated that the UK government secures ?800 million (about 1.5 trillion won) in revenue from the digital services tax for the 2025 fiscal year.

The Starmer administration is expected to announce its spring fiscal plan on the 26th, with each ministry likely to present spending cuts. The government has already announced plans to reduce welfare benefits, including tightening eligibility criteria for disability support payments and freezing disability allowances regardless of inflation, aiming to save ?5 billion annually (about 9.5 trillion won) by 2030. It also announced plans to cut public service budgets by 15% over the next five years, reducing the number of public servants by 10,000 from the current over 500,000, which surged during the COVID-19 pandemic, saving ?2 billion annually (about 3.8 trillion won).

However, amid rising calls for European security self-reliance since the Trump administration took office, the government has announced plans to increase defense spending. The plan is to raise defense expenditure from the current 2.3% of GDP to 2.5% by 2027.

This content was produced with the assistance of AI translation services.