Trump Administration Threatens Tariffs For Any Nation That Dares To Tax Big Tech

United States president Donald Trump last Friday issued a memorandum that suggests imposition of tariffs on nations that dare to tax big tech companies.

The memorandum mentions the digital services taxes (DSTs) were introduced to capture profits from revenue that tech companies generate in one country but collect in another. Netflix is often cited as an example of why such taxes are needed, because many of its customers around the world paid their subscriptions to an entity in The Netherlands. Governments argued that was inappropriate because Netflix was selling to their citizens, who consumed the vid-streamer’s services in their territory, and that a Netflix subscription therefore represented economic activity in their jurisdictions that should be taxed like any other.

Another reason DSTs were considered was that Netflix’s Netherlands scheme, like many other structures used by Big Tech companies, are legal-but-cynical tax efforts at reducing their tax bills to levels well below those local companies pay.

The OECD developed measures to prevent multinational companies using such tactics, and they have been widely adopted without stopping all of Big Tech’s tax tricks. DSTS were pitched as necessary – perhaps temporarily – while the OECD approach was developed, and adopted.

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Trump’s opposition to DSTs is not new: the Biden administration felt they disproportionately targeted US businesses and threatened 25 percent tariffs if they were not removed. The UK and Europe dropped some of the taxes, as did India.

Tariffs are now back on the agenda for remaining digital services taxes. As outlined in a Friday memorandum, Trump stated: “My Administration will not allow American companies and workers and American economic and national security interests to be compromised by one-sided, anti-competitive policies and practices of foreign governments. American businesses will no longer prop up failed foreign economies through extortive fines and taxes.”

“All of these measures violate American sovereignty and offshore American jobs, limit American companies’ global competitiveness, and increase American operational costs while exposing our sensitive information to potentially hostile foreign regulators,” the Memorandum adds.

The document also calls for US authorities to consider DSTs in its report on the OECD tax measures mentioned above, which Trump also feels unjustly penalize American businesses.

The Memorandum instructs the US Trade Representative to “identify tools the United States can use to secure among trading partners a permanent moratorium on customs duties on electronic transmissions.” Just when those tools will be identified, and implemented, is unknown.

However the administration’s intent is clear: Big Tech should not be taxed by any nation other than the US, which itself struggles to tax its top tech companies thanks to the tax minimization schemes the OECD deal was designed to dent. ®