Last week, the German Bundestag debated a proposal that sounds straightforward: make the largest tech companies pay their fair share. The Greens' motion, "Big Tech fair besteuern – Digitalsteuer jetzt", calls for a 10% digital services tax (DST) on revenues generated in Germany, targeting firms with global turnover above €750 million. The problem is that the target companies will not bear the cost - they will pass it on. And the evidence from every country that has already introduced a DST confirms exactly that.
The frustration that led to the proposal is a shared one. Companies like Google and Meta generate billions in European markets while routing profits through low-tax jurisdictions. However, Google already passes these taxes through to all of its advertisers, even itemising these DST surcharges as separate costs on advertiser invoices, broken down by country. Austria, France, Italy, Spain, the UK - businesses running ads in these markets have been absorbing Google's DST liability since 2020. Amazon and Meta have recently announced they will follow suit.
Who actually pays
The pass-through is not a loophole or an accident. It is the predictable consequence of applying a tax to companies with enough market dominance to simply reprice their services. DSTs tax digital advertising spend - and every business that advertises digitally absorbs the cost.
Hitting the wrong companies twice
Additionally, the proposed thresholds - €750 million global, €50 million domestic - are meant to protect small businesses. However, they do not protect European scaleups, which meet those thresholds well before they even reach profitability. At the €750 million mark, a DST levied on revenue can easily equal or exceed a company's entire profit. The tax does not hit cash cows, it hits rising stars, at the exact moment European companies need capital to compete.
European scaleups face a double hit: taxed on revenue before they've made a profit, and charged a DST surcharge on every Google or Meta ad they run. Big Tech can simply pass those costs on, while scaleups can't. Raising their prices means losing their customers - a constraint Big Tech does not face. The result is a squeeze that lands not on the intended target, but on the emerging European champions the continent has long been trying to build.
The better path
Inaction is not an answer, but a tax that fails its purpose and punishes the wrong actors is not progress either. If the goal is to curb Big Tech dominance, we already have the tool: enforcement of the Digital Markets Act.
The Digital Markets Act is the EU's set of rules for keeping the biggest tech companies in check. If enforced correctly, it would tackle the root of the problem: Big Tech’s ability to dominate markets and set terms others have no choice but to accept - rather than taxing the symptoms.
The idea of a national DST demands at the very minimum an honest conversation about design. If Germany moves ahead, the revenue threshold should at minimum align with the OECD Pillar One benchmark: €20 billion in global revenue, a figure that several countries have already coalesced around. That is the level at which a tax captures genuine digital giants, companies with the margins to absorb it and no credible case for exemption, but even this solution would not prevent taxes from being passed on by Google and Meta.
Last week's Bundestag debate presented an opportunity to confront the harder question: can Big Tech be taxed in a way that ensures the cost does not fall on those it was never intended to burden? A meaningful commitment to enforcing digital competition rules was not part of the discussion - but it’s a prerogative for any taxation to ever land on fertile ground. Everything else is a fig leaf and only imitates meaningful action against the prevailing dominance and unfair practices of Big Tech.