WASHINGTON—Germany’s Culture Minister Wolfram Weimer announced the country’s intention to impose a 10% tax on revenues of digital services providers targeting U.S. companies—an extraordinarily high rate. Although exact details are still to be determined, the Minister specifically named several U.S. companies as the primary targets of the tax in the interview announcing the initiative, which would likely largely shield competing incumbent suppliers.
Although the United States runs a sizable trade deficit with Germany, the popularity and success of U.S. digital services has provided a meaningful counterbalance, which is now at risk. Access to the digital advertising market in Germany is a significant part of this, as it is projected to reach $68 billion by 2030. The proposed tax, which is likely to be extracted mainly from U.S. firms, could cost them billions of dollars. What Germany is suggesting would be the largest digital services tax enacted to date, undermining a significant area of U.S. export success.
The announcement comes as several other countries are pursuing new digital services taxes (DSTs), including Canada, which is about to collect its first round of payments from U.S. companies on June 30, despite the U.S. government under multiple administrations opposing such taxes as discriminatory and burdensome.
The following can be attributed to CCIA Vice President of Digital Trade, Jonathan McHale:
“Targeting U.S. firms with a punitively high tax will only exacerbate trade tensions, and undermine Germany’s status as an investment-friendly location for innovative firms. We urge Germany to reconsider this ill-advised proposal. There is bipartisan agreement in the United States that digital services taxes are discriminatory, undermine U.S. exports, and attack the U.S. tax base. This announcement underscores the importance of deterring future DSTs through action on current pending jurisdictions, such as Canada and the UK.”
