The party has had a long standing policy, at least since 2021, on the Digital Services Tax (DST), whereby it has backed its use starting from Autumn 2021 through the “Towards a Fair Global Corporation Tax System” motion passed. Since then we’ve gone into the 2024 general election to triple it from 2% to 6% to fund mental health support in schools, and since then we have wanted to raise to 10% to fund our increases to defence spending in this critical time. All well and good but next fiscal year it’s projected to bring in £1.1billion, so an extra £4 to 5 billion, whilst nice on fiscal headroom scales, it really isn’t making a dent for investing into large departmental spends long term.

There is a great risk to the policy we push though. We took the view in 2021 against crediting UK corporation tax payments for future DST liabilities. What is also the case is that DST liabilities from 2022 until the end of the interim period, which has yet to be extended from 30th June 2024, will also be credited against future liabilities. This in theory leaves us safe for now to suggest increasing DST, but we have to remember that it is an interim tax waiting to be replaced on a global basis. Negotiations will resume and it would be against the spirit of the interim period to increase the DST and not expect requirements to offset payments now for later, as we’ve agreed previously. We can accept still push increases if we do believe it is necessary but have to accept the trade-off that it would reduce future revenues (and I would personally want consistent revenues!). 

This brings me to the reason behind this piece: Ed Davey posted last Thursday, both on X and on Bluesky , claiming the government is proposing to cut the DST. That seemed odd when I looked through the OBR report showing its projection of the DST steadily increasing. Then I saw the DST review which states: “DST was always intended to be an interim tax measure, which will be replaced once an appropriate global measure to the forementioned challenge is in place”. This review isn’t about replacing the DST, it is a requirement specified in section 71 of the Finance Act 2020, to review its implementation and effects. Anyone aware with Pillar One negotiations within the OECD knows that the DST by design is temporary, but its replacement with Pillar One agreements does not mean that this is a tax cut for multinationals, in fact it is very unlikely that is the case. It is certainly rich to make this argument too when we rightfully, despite flaws, backed pillar two implantation on the global minimum corporation tax, that we would raise concerns this way on the idea that a DST is a temporary measure and won’t exist. 

We need to be honest about policy trade-offs, it doesn’t mean that we’re on doorstep explaining these trade-offs in detail to voters but it does mean being honest in our messaging. I came into the Liberal Democrats with the idea the party stands up for being honest to its voters, in an era where the Conservatives, and now Labour, are dishonest in their governance. I don’t know where or how the misunderstanding on DST has occurred with Davey’s team, but it is a sore shame that after going across both platforms that the statement from Ed isn’t the reality, that it has remained up to collect criticism whilst not setting the record straight. Let’s lead by example and be honest with voters on one of our flagship policies, let’s hope there is a correction and let’s not treat the DST as a free way to cost policies.

* Brandon Masih is a Liberal Democrat campaigner in Reading. Views expressed in this piece are not representative of Reading Liberal Democrats, Young Liberals, LibSTEMM or Liberal Reform