- Trump threatened tariffs on countries imposing digital services taxes or regulations on US tech firms
- Digital Services Taxes (DSTs) are levied on gross revenues from digital services, not profits
- Trump claims DSTs discriminate against US tech firms while exempting major Chinese companies
US President Donald Trump has threatened to impose new tariffs restricting American chip exports to countries that levy digital services taxes or related regulations on US tech firms. He aims to pressure trade partners to drop taxes targeting major companies such as Alphabet, Meta, and Amazon.
"Digital Taxes, Digital Services Legislation, and Digital Markets Regulations are all designed to harm or discriminate against American Technology," he wrote on Truth Social on Monday.
"They also, outrageously, give a complete pass to China's largest Tech Companies. This must end, and end NOW!"
What Is A Digital Services Tax?
A Digital Services Tax (DST) is a revenue-based tax that countries impose on big tech firms for providing digital services to local users.
DSTs are not income taxes, online sales taxes, or VATs. Unlike traditional corporate income taxes, which are based on profits, DSTs are typically calculated on gross revenues. This means the total income a company earns from digital activities, such as online advertising, digital marketplaces, or the sale of user data, is taxed regardless of profitability.
Characteristics Of Digital Services Tax
- Revenue-Based Tax: DSTs are applied to gross revenues rather than profits. This aims to capture value generated from digital services provided to users in a specific country, even if the company does not have a physical presence there.
- Targeted At Large Multinationals: Typically, DSTs are designed to affect large multinational enterprises, often those with significant global revenues and substantial digital operations.
- Jurisdiction-Specific: The tax is levied based on the location of the user, meaning that if a company's digital service is used by a consumer in a particular country, that country may impose a DST on the revenue derived from that user.
Global Implementation
DSTs have been increasingly implemented since 2018 to ensure countries where digital companies operate can tax revenues generated from local users, regardless of the companies' physical presence.
The Organisation for Economic Co-operation and Development (OECD)'s Base Erosion and Profit Shifting (BEPS) 2.0 project and COVID-19 have accelerated focus on DSTs as governments seek fairer taxation of tech multinationals.
Fifteen OECD countries, including France, Italy, Spain, and the UK, have introduced or proposed DSTs, alongside non-OECD countries such as India, Brazil, and Argentina. The EU is also planning additional measures.
Canada's DST, effective since June 2024, applies a 3 per cent tax on revenues from digital services provided to Canadian users by companies meeting certain revenue thresholds. The UK has a DST targeting large digital companies with substantial revenue from UK users.
Why Trump Wants To Impose Tariffs On Countries With DSTs
Trump wants to impose new tariffs because he views DSTs as discriminatory measures that unfairly target American tech giants like Google, Meta, and Amazon, while often sparing Chinese firms. Many countries have adopted these taxes to capture revenue from digital companies operating in their markets, but Trump argues they single out US firms and harm America's technology leadership.
