EU holds back on taxing US Big Tech

As transatlantic trade tensions simmer, EU Commission president Ursula von der Leyen has floated the idea of taxing digital advertising revenue — a so-called 'Amazon tax' — as a possible countermeasure to US tariffs.

But with the EU now limiting retaliation to goods, the bloc appears to be backing away from that threat.

Von der Leyen's ‘Amazon Tax’, proposed in April, would consist of a digital service tax on the gross revenue of large digital companies operating within the bloc.

An EU tax is being pushed for by trade unions and some progressive MEPs as a bargaining tool in the trade conflict, given that the EU maintains a significant trade deficit in services with the US. 

Although an EU digital tax would apply to all large digital companies selling these services in the EU, it is largely seen as a way to tax US Big Tech companies, which dominate the global digital service sector. 

Opponents of the tax warn that the EU is highly dependent on US Big Tech for key services and that it could further escalate tensions with the administration of US president Donald Trump. 

But Oliver Roethig, regional secretary for UNI Europa, the trade union federation for service workers, told EUobserver that aside from its economic implications, a digital service tax would also serve to protect the EU's model of social dialogue.

Citing US Big Tech companies’ hostility towards collective bargaining, he said: “Apart from the digital service tax targeting the only area where the EU has a trade deficit, it’s a highly symbolic move in defence of Europe’s economic model, built on social dialogue and collective bargaining.”

Reforming tax rules

Proposals for an EU-wide digital tax were first introduced in 2018, as a temporary measure while new global tax rules were being negotiated at the Paris-based wealthy nations' club, the OECD. 

Under the OECD’s deal, some tax burden would be shifted to where goods and services are sold or used, rather than where the companies providing them are located.

Nevertheless, tax negotiations stalled when the Trump administration formally withdrew support from the OECD’s tax deal, arguing that it would discriminate against US companies. 

Meanwhile, several member states, including Spain, France, Italy, Austria, Portugal, Hungary, Poland, and Denmark, have implemented their own national digital tax.

Several other EU states, including Belgium, the Netherlands, and Norway have proposed or shown interest in national digital service taxes (DSTs). 

France’s DST taxes revenue from digital platforms and advertising services based on users’ data for companies exceeding a global revenue of €750m.

Similarly, Spain’s digital tax consists of a three percent tax on companies selling data and digital advertisements, also for companies with global revenues reaching €750m. 

The digital taxes of Spain, France, Italy, and Austria are subject to repeal if the OECD’s is signed. 

“We simply have to be cautious with digital corporations because we have no real alternatives to the offering by the American digital industry”

Opposition 

Digital service taxes have faced renewed opposition - both within and outside of the EU. 

Ireland has been a consistent opponent of an EU-level digital tariff and its Taoiseach, Micheál Martin, recently said he would oppose it, saying it would harm a sector vital to the country. Around 60 percent of Ireland’s corporate tax revenue comes from 10 US companies.

In April, former German finance minister Jörg Kukies cautioned against pressuring US Big Tech, saying that “we simply have to be cautious with digital corporations because we have no real alternatives to the offering by the American digital industry.”

Europe’s reliance on US Big Tech companies remains considerable, especially in key digital services. 

A report by UNI-Europa showed that Amazon received over €1.3bn in public contracts across Europe over a three-year span, mostly in contracts with the company’s web and cloud computing subsidiary, Amazon Web Services. 

Eliminating existing digital taxes has been an objective of the Trump administration as well. In February, the White House released a fact sheet referring to tax as “overseas extortion”. 

Late in April, US treasury secretary Scott Bessent attacked the digital service tax that member states have implemented, saying: “Some of the European countries have put on an unfair digital service tax”. 

“We want to see that unfair tax on one of America’s great industries removed”, he also said.

Taxing Big Tech

Taxing Big Tech multinationals has been the subject of prominent court cases within the EU.

A decision by the European Court of Justice ruled last year that Apple must repay Ireland €13bn in unpaid taxes, citing that Ireland had provided the company unfair state aid in tax deals.

A report from 2018 found that digital companies paid an average effective tax rate of around 9.5 percent throughout the EU, compared to around 23.3 percent for traditional businesses. 

Roethig also told EUobserver that “from our perspective, it’s unfair that US big tech companies on average pay two and half times less tax than European companies, while benefiting from European taxpayers' money in the form of lucrative public contracts.”

An analysis by the Centre for European Policy Studies (CEPS) sponsored by the Greens/EFA found that a five percent digital tax could generate around €37.5bn by 2026, representing nearly a fifth of the EU’s budget for 2025. 

Softening tone 

While von der Leyen told the Financial Times in April that the EU is prepared to implement a tax on US tech companies if talks with president Trump fail, the EU has not made explicit moves towards implementing such a move. 

A commission spokesperson told EUobserver that while they would not comment on the details of ongoing talks, a negotiated solution remains the commission’s preferred outcome. 

Nevertheless, the spokesperson said that “all options remain on the table.”

Regarding national digital taxes, the spokesperson said that existing national digital taxes were in line with discussions of the OECD Global Tax Agreement.

They also said that “should trade measures be taken against the Member States having a DST in place, appropriate measures will be considered in line with EU trade policy to defend EU interests.” 

And while some experts emphasise the security risks of relying on US Big Tech, Roethig told EUobserver that relying on US Big Tech also violates the EU's professed values: “The real problem is the model: we shouldn’t be subsidising union-busting, tax-avoiding, anti-democratic companies".

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