President Donald Trump has signed a new memo directing the Office of the US Trade Representative to investigate a reciprocal response to countries that have digital services taxes (DSTs). DSTs tax the gross revenue that online firms collect from offering services to users. This means that a country with a DST can tax all the revenue large companies operating online collect, even if the business is unprofitable. This revenue can include income from selling data, advertising, subscriptions, software, and other online services.
American firms, particularly Big Tech companies like Meta, Apple, Google, Amazon, and Microsoft, are significantly impacted by DSTs. A report published last year by the nonpartisan Congressional Research Service highlighted this disproportionate effect on American companies.
During the signing of the memo, President Trump expressed his concerns, stating, 'What they’re doing to us in other countries is terrible.' He did not disclose the potential extent of reciprocal tariffs on countries with DSTs.
It is important to note that the United States currently does not have a DST in place. These taxes are more prevalent in several European countries and India, where DST rates are among the highest globally.
