What Is Digital Tax – And Why Trump Is Threatening High Tariffs In Response | World News
New Delhi: US President Donald Trump recently issued a warning stating that any country that imposes digital taxes to American technology companies should withdraw it immediately; Otherwise, the US will respond by increasing tariffs on exports.
India, known as the equalization tax, has already abolished the digital service tax on non -resident American technology companies. The government announced this decision in the 2025-26 budget and the change entered into force as of April 1, 2025. This movement aimed to alleviate trade negotiations with the Trump administration.
Previously, Trump was expected to take a softer approach to India about tariffs. However, recently, with a 50 percent tariff on Indian goods, India’s speculation has emerged.
Add Zee News as a preferred resource
Some Indian media reports suggested that the government could apply digital service taxes to American companies such as Alphabet (Google’s parent company), meta and Amazon. However, no official approval has been obtained from the Indian authorities.
Trump has implemented tariffs ranging from 10 to 50 percent in more than 90 countries. India and Brazil are facing the highest tariffs with 50 percent. The export tariffs to the United States of India entered into force on 27 August 2025.
What is digital service tax?
The digital service tax applies to large international technology companies operating in a country without physical existence. Traditionally, the corporate tax is only valid when a company has a permanent organization in a country.
However, companies such as Google, Meta, Amazon and Netflix produce billions of dollars from many countries without local offices. Revenues come first from advertising and various online services.
Countries, even if these companies are not physically available, argue that they earn income from their citizens and therefore should pay taxes.
Who affects?
This tax usually targets foreign companies that make money from users in a particular country.
Google covers services such as online advertising used by Meta and Youtube to generate revenue. E-commerce platforms such as Amazon and Flipkart win through product sales. In addition to online markets such as Uber and Airbnb, flow services such as Netflix and Spotify earn money from worldwide users without a physical office.
These companies also benefit from user data by offering targeted ads to advertisers. In India, this tax is called equalization tax. In 2016, it was introduced at 6 percent in digital advertising, but it was removed in the 2025-26 budget. 2 percent trading tax in e-commerce companies has already been abolished.
Withdrawal of Canada and EU
Canada recently announced that digital taxes on American technology firms with withdrawal only hours before the first payment was made. This movement aims to restart trade negotiations with the United States, considering that 80 percent of Canada’s exports went to America.
Trump described Canada’s tax as a “direct attack ve and canceled trade negotiations and threatened to implement additional tariffs to Canadian imports.
European Union countries also paused the implementation plans of digital service taxes to US technology giants. This is seen as a big gain for companies such as Trump and Apple and Meta.
Trade negotiations between the European Union and the United States were continuing, and the taxation of European digital firms was concerned that it could progress.
What do American technology companies say?
US technology companies that win abroad without physical offices are opposing digital taxes. They already claim that they have paid taxes in their own countries and that they force them to pay twice.
The US government sees these taxes as a discriminatory.
Critics claim that digital taxes ultimately harm small local enterprises and consumers because companies are increasing prices and exceeding tax costs.
Trump sees digital service taxes as a direct attack on American technology profits and American interests. While Europe uses these taxes as a way to increase income, China restricts US US companies to market access to protect domestic companies.
