<p>Digital services taxes (DSTs) — once a technical fix for governments struggling to capture revenue from global tech giants — are back at the centre of a geopolitical storm. On August 26, 2025, US President Donald Trump warned that countries imposing such taxes could face tariffs and even restrictions on sensitive American exports, opening a new front in Washington’s long-running clash with foreign tax regimes.</p><h2>What are digital services taxes?</h2><p>DSTs are turnover-based levies, usually set at 1.5–6 per cent, imposed on the revenues large online companies earn from local users. They typically apply to online advertising, marketplace commissions, and the sale of user data. Governments argue these taxes close loopholes that allow digital firms to book profits abroad while drawing heavy revenues from local markets. The US has consistently opposed DSTs, calling them discriminatory because they mostly affect American firms such as Google, Amazon, Facebook, and Apple. Critics also warn that they risk double taxation until a multilateral deal under the Organisation for Economic Co-operation and Development (OECD) is finalised.</p><h2>Which countries have imposed DSTs?</h2><p>Over the past decade, dozens of countries have introduced or debated DSTs. In Europe, the United Kingdom currently levies a 2% DST, while France, Italy, Spain, and Austria have designed their own national versions. Turkey and India have also put DST-like levies in place, with India’s “equalisation levy” targeting digital advertising and platform services. Outside these hotspots, countries from Brazil to South Korea have considered their own measures. Canada backed away from implementing a DST in June 2025 after Washington applied pressure, showing how US threats can alter policy.</p><h2>Why Washington is threatening retaliation</h2><p>The US has a long history of pushing back against DSTs. During earlier Trump and Biden administrations, Washington launched Section 301 trade investigations into countries imposing these taxes, concluding they unfairly targeted American firms. While tariffs were drafted, they were suspended as OECD negotiations advanced. Trump’s latest warning marks an escalation. In addition to tariffs, he raised the prospect of export controls on US technology — an unusually aggressive tool in disputes traditionally confined to tax and trade.</p><h2>Which countries are most at risk?</h2><p>If the US follows through, the countries most exposed include:</p><p>United Kingdom still applies a 2% DST and was explicitly mentioned in reporting on Trump’s comments</p><p>France, Italy, Spain, and Austria – all have had DSTs under US investigation</p><p>Turkey and India – both continue to impose their own digital levies</p><p>Brazil and South Korea have discussed DSTs and were flagged in US trade circles</p><h2>What’s next?</h2><p>The future of DSTs is tied closely to the OECD’s “two-pillar” tax framework, which aims to reallocate taxing rights and set a global minimum tax. Some governments see their DSTs as temporary measures until the OECD deal takes effect; others keep them as leverage. For Washington, however, unilateral digital taxes remain red lines. The US stance has already forced Canada to retreat. Whether European powers and India will do the same — or dig in for a transatlantic showdown — may depend on how far Trump is willing to go in weaponising tariffs against allies.</p>

Trump threatens tariffs over digital services taxes: Which countries are at risk? What it means for India?

Digital services taxes (DSTs) — once a technical fix for governments struggling to capture revenue from global tech giants — are back at the centre of a geopolitical storm. On August 26, 2025, US President Donald Trump warned that countries imposing such taxes could face tariffs and even restrictions on sensitive American exports, opening a new front in Washington’s long-running clash with foreign tax regimes. What are digital services taxes? DSTs are turnover-based levies, usually set at 1.5–6 per cent, imposed on the revenues large online companies earn from local users. They typically apply to online advertising, marketplace commissions, and the sale of user data. Governments argue these taxes close loopholes that allow digital firms to book profits abroad while drawing heavy revenues from local markets. The US has consistently opposed DSTs, calling them discriminatory because they mostly affect American firms such as Google, Amazon, Facebook, and Apple. Critics also warn that they risk double taxation until a multilateral deal under the Organisation for Economic Co-operation and Development (OECD) is finalised. Which countries have imposed DSTs? Over the past decade, dozens of countries have introduced or debated DSTs. In Europe, the United Kingdom currently levies a 2% DST, while France, Italy, Spain, and Austria have designed their own national versions. Turkey and India have also put DST-like levies in place, with India’s “equalisation levy” targeting digital advertising and platform services. Outside these hotspots, countries from Brazil to South Korea have considered their own measures. Canada backed away from implementing a DST in June 2025 after Washington applied pressure, showing how US threats can alter policy. Why Washington is threatening retaliation The US has a long history of pushing back against DSTs. During earlier Trump and Biden administrations, Washington launched Section 301 trade investigations into countries imposing these taxes, concluding they unfairly targeted American firms. While tariffs were drafted, they were suspended as OECD negotiations advanced. Trump’s latest warning marks an escalation. In addition to tariffs, he raised the prospect of export controls on US technology — an unusually aggressive tool in disputes traditionally confined to tax and trade. Which countries are most at risk? If the US follows through, the countries most exposed include: United Kingdom still applies a 2% DST and was explicitly mentioned in reporting on Trump’s comments France, Italy, Spain, and Austria – all have had DSTs under US investigation Turkey and India – both continue to impose their own digital levies Brazil and South Korea have discussed DSTs and were flagged in US trade circles What’s next? The future of DSTs is tied closely to the OECD’s “two-pillar” tax framework, which aims to reallocate taxing rights and set a global minimum tax. Some governments see their DSTs as temporary measures until the OECD deal takes effect; others keep them as leverage. For Washington, however, unilateral digital taxes remain red lines. The US stance has already forced Canada to retreat. Whether European powers and India will do the same — or dig in for a transatlantic showdown — may depend on how far Trump is willing to go in weaponising tariffs against allies.

<p>These taxes are commonly applied to online advertising, marketplace commissions, and the sale of user data. Governments argue that they help close loopholes that let digital companies record profits in other countries, even though they generate significant revenue from local markets</p>

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Trump threatens tariffs over digital services taxes: Which countries are at risk? What it means for India?