In two months, we will celebrate 250 years since the Founding Fathers declared our independence from European taxation. Today, European governments are levying digital services taxes written to apply only to large American tech companies. If the Trump administration is to be pugnacious on trade, they ought to fight hardest against these discriminatory taxes eroding open markets.
Selective taxation from DSTs has cost American companies billions. A new study from the Tholos Foundation, a sister organization to my employer Americans for Tax Reform, indicates that European “digital sovereignty” regulations and taxes are surgically designed to transfer American wealth to governments across the Atlantic. The study by Australian economist Sinclair Davidson identifies several EU and country-level laws that treat American companies as colonial subjects.
These chiefly take the form of digital sovereignty taxes, or DSTs. U.S. firms already pay nearly $3 billion annually in DSTs, a figure Davidson projects could double by 2030 to $9.6 billion with broader adoption. European states levy the most DSTs, and only American companies ever seem to pay them.
These are the very companies satisfying market demand their own domestic industries seem incapable of serving. Overregulation and taxation are the reasons European entrepreneurs have failed to launch any major tech platform besides Spotify in the last 20 years.
American dominance of their markets is self-inflicted. Precautionary regulation and excessive government control of industry are to blame for there being no European Amazon, Google, or Meta. China and Singapore have successfully launched TikTok and even Japan has its own homegrown search engine in Yahoo Japan (a wholly indigenous company that only licenses the Yahoo brand name).
Europe prevents its own people from building tech platforms.
Because they have taxed and regulated their own tech companies to oblivion, however, European states cannot raise any revenue from a non-existent tech sector. They found a new cash cow in American tech giants.
Europe's approach insulates its own companies while imposing massive compliance costs, fines, and fees on U.S. firms. While their own companies are not affected by DSTs, they are nonetheless unable to provide the digital services Europeans demand owing to the weight of domestic regulations with which they are yoked. The process conforms to a now-familiar pattern: The EU and its member states make it impossible for their own citizens to innovate, demand services from Americans who are allowed to build things, then use them as a piggy bank for their welfare states.
Nor is this confined to the European Union. DSTs between the EU, UK, and east Asian countries could cost U.S. firms up to $117 billion cumulatively over the next decade according Davidson’s analysis. This figure accounts only for direct payments to governments and not regulatory compliances costs or lost revenue, which he estimates at up to $100 billion annually.
While DSTs are the greatest vector of extraction, the EU has several other continent-wide regulations it can leverage to tax Americans. Data privacy is regulated by the General Data Protection Regulation (GDPR), under which 83% of fines (totaling over $5 billion) have hit American-owned companies.
More concerning still is the reach of Europe's approach. European leaders, regulators and industry groups are actively promoting – and even directly lobbying for – the adoption of their digital rulebook across Latin America. As a result, countries in our own hemisphere have begun adopting similar policies.
Brazil is currently considering Bill 4675/2025, the so-called Fair Competition Act. This legislation would designate “systemically relevant” digital firms, based primarily on size thresholds that effectively single out successful U.S. companies, for sweeping ex ante obligations. Rather than addressing specific harmful conduct through established antitrust tools, it would restrict how services can be designed, integrated, and improved.
This approach discourages new features, business models, and investment while benefiting neither Brazilian consumers nor small businesses that rely on these platforms to communicate, shop, advertise, and access entertainment. This is to say nothing of the effect on interpersonal communication and freedom of speech, which has recently been under assault in Brazil. It also opens the door for Chinese competitors to gain a foothold in the Western Hemisphere.
Canada imposed its own 3% DST in June of 2024 on all digital sales and online advertising. On paper it applied to any company doing business in Canada, but it only kicked in for companies that earned €750 million globally and over C$20 million domestically. In practice, this meant only American tech companies had to pay. It was also retroactive to January 1, 2022; revenues already earned were taxed ex post facto, which is unconstitutional this side of the border.
The consequences ripple far beyond corporate balance sheets or even long-term security threats. Fewer American jobs are created as companies absorb punishing compliance burdens. Investment in research and development shrinks. Innovation slows. Those costs do not remain overseas — they are ultimately borne by American workers and consumers. Europe's regulatory aggression is, in effect, a tax on the American middle class.
The Trump administration should take strong action against DSTs, as Americans for Tax Reform and two dozen organizations recently urged. Leveraging our economic might to get them repealed has already proven successful: Canada repealed theirs in March of this year as part of trade negotiations with the U.S., likely because 80% of their exports go south.
While we do not have this kind of leverage on any other country, Brazilian President Lula Da Silva is in Washington this week to discuss digital trade. Trump should use the opportunity to try and get Bill 4675/2025 shelved. If the EU or UK want a free trade deal, repealing their DSTs should be non-negotiable.
As our republic’s 250th birthday approaches, we need to renew our declaration of independence from unjust taxation.
