Digital Services Taxes Pose a Growing Risk to American Competitiveness

The American tech sector has been central to our nation's economic strength for decades. Every year, leading U.S. tech companies spend billions of dollars on research and development to create digital products and services that consumers across the globe love and prefer. As a result, the digital economy supports millions of jobs and accounts for nearly 10% of the U.S. economy.

That position, however, is increasingly under threat. A growing number of governments abroad are advancing digital trade barriers, including the increasing prevalence of digital services taxes (DSTs), which are targeted levies imposed on revenue generated from certain online services in those markets. In recent years, countries like Australia, France, and the UK have imposed DSTs. A German official has reportedly tasked officials in the department that he is leading with drafting a digital services tax bill, and just recently, leaders in Poland announced their intentions to move forward with plans to impose fees on digital products and services.

These digital rules disproportionately harm American companies, precisely because they lead in the areas being taxed, including search engines, online marketplaces, social platforms, and digital advertising. And while U.S. companies are the target of DSTs, their impacts reverberate across the broader American economy. By raising the cost of international operations, DSTs reduce resources available for research and development and threaten U.S. jobs. At the same time, the additional costs imposed by foreign nations reach American consumers and small businesses at home. Startups face higher prices for cloud services, entrepreneurs spend more on digital advertising, and firms adopting AI tools shoulder heavier expenses. Over time, these burdens threaten to limit growth and erode the competitiveness of the U.S. digital economy.

Taxes targeting successful companies reduce incentives to invest in research and development and slow the pace of technological advancement, not just in the United States, but globally. In effect, DSTs signal that success will be taxed rather than rewarded, undermining the incentives that drive economic growth.

President Trump has rightly recognized the threat posed by DSTs and has taken steps to prevent foreign governments from unfairly targeting American tech companies. His administration's focus on this issue has sent a clear signal pushing back on discriminatory trade barriers designed to penalize U.S. innovation and economic interests.

That leadership must continue. Protecting America's digital economy benefits the workers, small businesses, and consumers who rely on U.S. innovation. By keeping DSTs a priority, and pressing for fair treatment of American firms in global markets, the administration can ensure that these companies remain competitive, our economy continues to grow, and the U.S. can maintain its technological leadership on the global stage.