Big tech, big taxes?

Ever wonder how the biggest tech companies pay taxes abroad—or don’t? With talk of Trump possibly rethinking tax policies after he returns to office, including a potential exit from the OECD, I looked into how this might affect U.S. tech companies and international tax rules.

Here’s what I found:

The Digital Services Tax (DST) is a special tax that some countries, like India, charge to big digital companies—think Amazon, Google, Facebook—based on revenue they make from online business in that country. Normally, tech companies only pay major taxes in their home country, but DSTs make sure they contribute a bit wherever they’re earning, too.

In India, the DST is called the “Equalization Levy,” which adds a 2-6% tax on the earnings that foreign digital companies make in India. For India, this tax is a way to capture revenue from global tech giants who reach millions of Indian users but may not have a big physical presence there.

"Changes made in UB 2024:

2% EL on e-commerce transactions - abolished from 1 August 2024

6% EL on online advertisement services - to continue."

To address these kinds of taxes worldwide, the OECD (Organization for Economic Cooperation and Development) has been working on a global tax framework so each country doesn’t need its own DST. This would replace DSTs with a single, fairer approach that works for every country, including the U.S.

If the U.S. leaves the OECD and brings back its own DST, it might lead to other countries taxing American tech companies more heavily, while the U.S. could do the same to foreign companies operating here.

Why is the U.S. against DSTs? Since most of the largest digital companies are American, DSTs tend to hit U.S. firms the hardest. The U.S. sees this as unfair, arguing that these taxes unfairly target American businesses and can disrupt trade relationships.

Why does this matter? Because the way big tech is taxed can affect everything from trade relationships to the prices we pay as consumers. How the U.S. handles DSTs and the OECD’s global tax rules could shape the future of the digital economy—both at home and abroad.

The above global tax framework for DSTs comes under Pillar 1 of OECD.

Bonus Insight: What’s Pillar Two? It’s a global minimum tax rate proposed by the OECD to ensure that big companies pay at least 15% tax on their profits, no matter where they are based. This would prevent companies from shifting profits to low-tax countries (Tax heavens) , aiming for a fairer global tax system and reducing the need for DSTs.