Brussels: Several European countries have introduced digital services taxes in recent years, while others are preparing similar measures, as governments seek to address gaps in how large technology companies are taxed in the digital economy.
Digital services taxes (DSTs) target revenues generated by online activities such as digital advertising, data sales and online marketplaces. The measures have gained momentum as global digital companies often generate substantial income in countries where they have little or no physical presence, limiting their local tax liabilities under existing corporate tax rules.
The European Commission has repeatedly said that the current international tax framework does not adequately capture profits generated by digital business models and that all sectors should contribute fairly to public finances.
Within the European Union, France, Spain, Italy, Austria, Denmark, Hungary, Poland and Portugal have implemented DSTs. Outside the bloc, the United Kingdom, Switzerland and Turkey have also introduced similar levies. Several other countries, including Belgium, Czechia, Latvia, Slovakia, Slovenia and Norway, have announced plans or signalled intentions to introduce a tax on digital services.
DST rates and scope vary significantly across Europe. According to data from the Tax Foundation, rates generally range between 3 per cent and 5 per cent. Hungary currently applies the highest rate at 7.5 per cent, while Turkey reduced its rate to 5 per cent in 2026 and plans a further cut to 2.5 per cent in 2027. The UK and Denmark apply a 2 per cent tax, while Poland levies 1.5 per cent on streaming and audio-visual services. Several countries, including France, Italy and Spain, apply a 3 per cent rate.
In many cases, the taxes primarily target online advertising revenues, though some countries also include digital intermediation services, data sales and on-demand media platforms. In the UK, for example, the levy applies to social media platforms, search engines and online marketplaces.
Efforts to address digital taxation at a global level are ongoing. The OECD has been leading negotiations involving more than 140 countries to reform international tax rules. One proposal, known as Pillar One, would reallocate part of the profits of the world’s largest multinationals to countries where their users are located, regardless of physical presence.
Digital services taxes have also contributed to trade tensions. As many of the companies affected are based in the United States, the measures have drawn criticism from Washington. The issue has previously prompted tariff threats, and some countries have faced pressure to suspend or revise their digital tax regimes.
Despite this, several European governments have indicated that DSTs will remain in place until a global agreement on digital taxation is implemented.
