Digital Taxes vs. Tariffs: Inside the Global Fight Over Who Gets to Tax Big Tech

Smith’s Samuel Handwerger Describes the Century‑Old Tax Rulebook as No Longer Fitting the Digital Economy

A century‑old international tax rulebook is colliding with the realities of a digital economy, and the result is a growing global standoff over who gets to tax the world’s largest technology companies. In his new blog post, Samuel Handwerger, CPA and lecturer in accounting at the University of Maryland’s Robert H. Smith School of Business, explains how digital services taxes (DSTs) emerged, why the United States opposes them, and how the dispute has escalated into threats of 100% tariffs on European goods.

For decades, international tax treaties have relied on a simple principle: a country may tax a foreign company’s business profits only if that company has a physical presence—an office, store, or factory—within its borders. That framework worked in an era of manufacturing and distribution. It breaks down, Handwerger argues, when applied to digital platforms that sell advertising or operate marketplaces in a country without owning property or employing workers there.

France was the first major economy to challenge the old model. Its 3% digital services tax, enacted in 2019, applies to large technology firms whose revenue is generated partly through French users, advertisers, and consumers—even if the companies have no physical footprint in France. Roughly eighteen countries have adopted similar DSTs. The United States views these taxes as discriminatory, noting that they overwhelmingly affect American companies such as Google, Meta, Amazon, and Apple. U.S. policymakers also see DSTs as a direct threat to the American tax base, since profits taxed abroad are profits not taxed at home.

An attempted multilateral solution—the OECD’s Pillar One framework—would have updated global tax rules to allow limited taxation based on customer location. But U.S. withdrawal from negotiations in 2025 stalled the effort, leaving unilateral DSTs in place and prompting retaliatory proposals in Washington.

The conflict intensified on June 26, 2026, when President Trump threatened a 100% tariff on goods from countries that impose DSTs on American firms. Handwerger notes that the dispute now pits digital‑era tax frustrations against one of the bluntest tools in trade policy.

Handwerger also serves as faculty advisor to UMD’s Financial Wellness Center and the UMD-student-operated nonprofits Justice for Fraud Victims and TerpTax. Read his full essay, Why DSTs & Tariffs are the Tax Weapons of the 21st Century, at Tax Insights & Fraud Awareness, exploring why the underlying problem remains unresolved—and why more DSTs, more threats, and more tariff brinkmanship are likely until global tax rules catch up with digital business models.