Canada’s decision to drop a tax on US tech giants, reportedly under pressure from Donald Trump, is raising concerns about the future of similar digital services taxes (DSTs) in other countries, particularly across Europe.
While approximately half of European OECD nations have either announced, proposed, or implemented such taxes, their future is now uncertain following a Group of Seven (G7) agreement to exempt US multinational companies from a global minimum tax.
This move drew sharp criticism from Nobel laureate economist Joseph Stiglitz, who argued, “This is about more than trade—it’s about whether democratically elected governments can regulate and tax powerful corporations or whether tech billionaires can dictate policy through political proxies.”
Several major countries, including Austria, Brazil, Britain, France, India, Italy, Spain, and Turkey, have either imposed or plan to impose special taxes on large tech firms.
The primary objective of these taxes is to ensure that these companies pay taxes in the countries where they generate revenue and to counter their common tax optimisation strategies. These taxes generally target sales revenue, primarily from US firms like Alphabet (Google), Amazon, Apple, Facebook (Meta), and Microsoft.
The specific revenue streams taxed and the rates vary by country, with most proposed or adopted rates ranging from 2 to 5 per cent of the targeted revenue. Many nations adopted these taxes as a temporary measure pending a global agreement on multinational corporate taxation, but prospects for such a deal now appear dim.
According to data from the EU Tax Observatory (June 2023), these taxes have generally increased revenue year after year.
Britain, France, India, and Turkey have seen steady growth in the revenue generated from their DSTs. Last year, both Britain and France raised approximately $1.1 billion through their digital services taxes. Italy’s revenue from the tax reportedly jumped by 90 per cent from 2021, exceeding $530 million last year. However, Spain, which had aimed to raise over a billion dollars annually, collected only around $350 million in 2023.
Before Canada’s reversal, India had already paused its six per cent tax on online advertising by foreign firms in April, against the backdrop of trade talks with the United States.
The fate of these taxes in other nations remains precarious. While Britain has secured a trade deal with the US to avoid tariffs, it has not ruled out modifying or eliminating its digital services tax.
Despite these developments, EU nations have not yet indicated that their digital taxes are under review.
A German government spokesman stated on Monday that Canada’s decision had “absolutely no bearing” on Berlin’s position. However, concerns persist among advocacy groups.
The Tax Justice Network, a coalition of researchers and activists, warned that national digital service taxes are “vulnerable to economic and political threats—particularly from the US, which has historically protected its digital multinationals from fair taxation abroad.”
