Taxing Big Tech: State Sovereignty Under Threat

Washington has brought out the heavy artillery: digital taxation has become a geopolitical battlefield. States daring to tax tech giants face threats of retaliation. In this context, a fundamental overhaul of the international tax framework is essential. A North–South coalition, backed by the United Nations, could lay the foundation for a new balance — fairer, more resilient, and more respectful of national sovereignty.

The current international tax system, inherited from the 20th century, taxes factories but not algorithms. It tracks warehouses but ignores clouds. The result: the ten largest platforms (Google, Apple, Meta, TikTok, Baidu…) generated over $500 billion in revenue in 2023 while largely avoiding taxation. In many developing countries, they pay only a tiny fraction of what they should. Meanwhile, tax revenues are eroding, inequalities are deepening, and states are losing their capacity to act.

The OECD agreement, meant to tax profits where users are located (Pillar 1) and to establish a global minimum tax (Pillar 2), is at a standstill. The U.S. Congress blocked its ratification, and the new Trump administration buried it by withdrawing from the process. Taxation has become a tool of foreign policy.

This legal vacuum encourages unilateral tax measures. Several countries have maintained or are considering their own digital taxes in the absence of a multilateral framework. But U.S. pressure is huge: India, once a pioneer in the field, announced on April 1st the repeal of its 2% tax on digital advertising revenue (€440 million in 2022), under threat of trade sanctions.

In Africa, the stakes are critical. According to the UN Economic Commission for Africa, the continent could lose up to 30% of its VAT revenue by 2030 if no action is taken. Tax administrations, such as Kenya’s, struggle to trace digital flows that pass through a fiscal paradise before disappearing into the Virgin Islands. States are under pressure from citizens protesting against unbearable tax burdens, as seen in the DRC or Kenya. Small taxpayers bear the load for all: how can one justify taxing a cattle farmer on his livestock while a multinational rakes in millions tax-free?

But Africa is not standing still. Kenya has implemented a 1.5% tax on platform revenues, along with a 16% digital VAT — totaling $78 million in 2023. Nigeria has introduced a similar framework. These models, simple and effective, protect local SMEs while restoring tax equity. They are not “anti-GAFAM” taxes but transitional, non-discriminatory measures awaiting a global agreement.

In Europe as well, digital taxes have proven their worth: €591 million for France, €900 million for the UK. But they are now under attack from Washington. In London, a parliamentary debate is underway: should the tax be maintained despite the threat of sanctions, at a time when the country plans €6 billion in budget cuts by 2030?

In the face of this deadlock, a new balance is possible. In 2024, 110 countries backed a UN framework convention on taxation. Its goals: to establish a source-based tax on digital services integrated into bilateral tax treaties; ensure equal governance (“one country, one vote”); and strengthen the capacity of Southern countries to trace and tax digital flows.

This momentum could take shape through a North–South forum under the UN umbrella, built around three key missions:

1. Pooling best fiscal practices;
2. Coordinating transitional taxes to avoid a chaotic proliferation;
3. Strengthening administrative and technological capacities, especially in digital flow traceability.

Europe has a pivotal role to play. Following U.S. reprisals, it has announced the potential for a tax on American digital services. This awakening is welcome and could inspire many countries in the Global South if a coalition were to emerge. Europe must maintain diplomatic pressure on Washington to revive the multilateral agreement, while co-developing an alternative with emerging powers through this North–South forum.

This agile minilateralism — led by India, Brazil, Nigeria, South Africa, and Europe (UK and the EU) — could shape a post-Western digital governance that is more balanced and legitimate.

Digital flows still escape tax radars — but not the giants’ appetite. It is time to rewrite the rules. Taxing the digital economy does not stifle innovation: it restores tax justice, protects states, and reaffirms a fundamental principle — sovereignty is non-negotiable.