The German government said on Wednesday that it would impose a 10 percent tax on big digital platforms like Google and Meta, in a move that could broadly reshape the digital economy and spark trade tensions.
The levy is a way of combating what the author has called “smart tax evasion” by tech giants and see them more fairly generate income for Germany’s economy and culture, the country’s culture minister Wolfram Weimer said.
The digital services tax will be levied on the revenue that the companies make from these platforms in Germany, especially in the form of advertising income.
Weimer said his ministry is currently working on the legislation and is also open to dialogue with the concerned companies to seek other approaches, such as voluntary contributions to the German media landscape.
The effort jibes with the coalition deal of Chancellor Friedrich Merz’s center-left government, which committed to spend a year reviewing a tax against internet companies.
The money from the tax is to be invested back into Germany’s media landscape, which has come under increasing pressure from the stranglehold of global tech platforms.
The announcement has been welcomed by German media groups,who say that the massive benefiting off the society in which they operate for too long without sufficient regard for the consequences. They stress that their business models have been heavily influenced by the market power of these digital behemoths.
But Germany’s audacious step will almost certainly heighten trade tensions with the United States, particularly under the Trump administration, which has objected to these digital service taxes in the past, calling them discriminatory against American companies.
More than 40 countries have put in place digital taxes to date, and President Trump has threatened to impose retaliatory tariffs on countries that enact these levies. Chancellor Merz is also due to visit President Trump in Washington so this makes matters more complicated.
Germany’s proposal comes after similar actions in other European countries including France and Austria, and in countries such as India and Canada, where such digital services taxes are already in place or being considered.
Though the precise design for the German levy is still in progress, Weimer hinted that it could be akin to the 5% tax on online advertising revenues in place in Austria.
In Germany, the government seems undeterred by the prospect of American retaliation, arguing that the digital age requires a fairer system of taxation.
Weimer also noted a worrying trend of media power consolidation in the hands of a handful of major tech firms, with dangers posed to both freedom of speech and democratic debate.
What happens in the coming weeks and months will be critical as Germany advances its legislative proposal and negotiates with both the tech industry and the US government.
And this will closely watched around the globe, because it may serve as a model for how other countries deal with the tax issues that have been raised by the advent of the increasingly dominant digital economy.