As European nations grapple with the implications of digital sales taxes (DSTs) on American tech giants, the UK and Poland are taking divergent approaches. While Britain is reconsidering its policy to avoid U.S. trade penalties, Poland is pushing forward with its tax plans despite warnings from Washington.
UK Weighs Changes to Avoid U.S. Retaliation
UK Chancellor of the Exchequer Rachel Reeves revealed on Sunday that the government is assessing potential modifications to its 2% DST, which targets U.S.-based tech firms. The move follows concerns that President Donald Trump may impose tariffs on countries implementing digital taxes, a stance he reinforced in a February 20 executive order.
The Trump administration argues that DSTs unfairly burden American companies, draining billions from them and violating U.S. sovereignty. The order asserts that the U.S. “will not allow American companies and workers and American economic and national security interests to be compromised by one-sided, anti-competitive policies.”
The U.S. has previously targeted DSTs in Austria, France, Italy, Spain, Turkey, the UK, and Canada, viewing them as discriminatory against American firms. Several European nations, including France and Spain, currently impose a 3% tax on global companies earning at least €750 million annually through digital advertising, data sales, and intermediation services. Austria’s DST goes further, charging a 5% levy on online advertising profits exceeding €25 million.
Poland Stands Firm Despite U.S. Warnings
Unlike the UK, Poland appears committed to its digital tax plans. Deputy Prime Minister Krzysztof Gawkowski announced on Monday that he intends to push ahead with legislation this year, despite sharp criticism from the U.S. Ambassador to Poland, Tom Rose. Rose warned that the tax is “not very smart” and suggested that Trump “will reciprocate as well he should” if Poland proceeds.
In response, Gawkowski dismissed the warning as an unacceptable interference in Polish policymaking. “We started the consultation process, and suddenly an important American official tells us we have no right to introduce laws in Poland,” he said. “There will be no consent to this.”
Poland’s Ministry of Digital Affairs has already begun consultations with the private sector to develop an appropriate DST model. A ministry spokesperson emphasized that the tax is “a pro-development measure” aimed at strengthening Poland’s digital economy rather than targeting specific companies or countries. Prime Minister Donald Tusk reportedly supports the initiative, though his office has yet to confirm.
Trump’s History of Tariff Threats
The U.S. has a history of using tariffs to counter digital taxes. In 2019, during Trump’s first term, the Office of the U.S. Trade Representative investigated DSTs in several countries, including France, the UK, Italy, and Spain. By mid-2021, the U.S. announced 25% tariffs on select imports from these nations, only to suspend them later that year following international tax negotiations under the Organisation for Economic Co-operation and Development (OECD).
However, Trump’s latest executive order signals a reversal of this diplomatic approach. The order states that since the U.S. has withdrawn from OECD tax negotiations, the Trade Representative may renew previous investigations and open a new one into Canada’s 2024 DST.
What’s Next for Poland and the UK?
While Poland remains firm in its stance, the UK’s willingness to adjust its DST suggests a more cautious approach to avoid economic retaliation. With the U.S. increasingly assertive on trade, European nations face tough choices—either risk tariffs by maintaining digital taxes or alter their policies to align with Washington’s demands.
As Poland prepares to advance its legislation and the UK reviews its strategy, the broader question remains: will more European countries adjust their tax policies in response to U.S. pressure, or will they stand firm and risk a trade war?
