Europe awaits a global digital tax deal and keeps its own levy in reserve

The European Commission is prioritising a global tax agreement through the OECD over a European digital services tax of its own. Commissioner Wopke Hoekstra, responsible for tax policy, confirmed on 19 September 2026 that the EU will only consider its own levy if international negotiations demonstrably stall. For as long as that process continues, Brussels is keeping its options open.

The cautious stance has a concrete rationale: the Commission fears retaliatory measures from the United States. European digital taxes mainly affect large American tech companies such as Amazon, Google and Meta, and Washington has previously threatened counter-tariffs on European exports. That political risk weighs heavily in Brussels' calculations.

Pillar 1 has been running for years and has yet to produce an agreement

The international debate on taxing digital companies has been under way through the OECD for some time. In October 2021, more than 130 countries endorsed a two-pillar approach. The second pillar, a global minimum corporate tax rate of 15 per cent for multinational groups with annual revenues of at least €750 million, has already been transposed into EU legislation via a directive of December 2022.

The first pillar, which specifically concerns the allocation of taxing rights over digital services and large multinationals, remains stuck. In March 2024, OECD negotiations once again failed to produce an agreement that would replace national digital services taxes. G7 finance ministers have asked the OECD to deliver a progress report by December 2026. OECD tax director Manal Corwin states that talks are proceeding constructively and that participating countries want to avoid a fragmented patchwork of national measures, but a definitive agreement has still not been reached.

The EU has stated that the international track will be given until the end of 2026 to succeed. If an agreement is not reached by then, a decision on an EU-wide levy could follow.

Member states are divided and several countries have already gone their own way

There is no consensus within the EU on a common digital tax. France, Italy, Spain and Austria have already introduced national digital services taxes. France levies a 3 per cent charge on revenues from digital intermediary services and targeted online advertising, applying to companies with more than €750 million in global turnover and more than €25 million in taxable revenues in France.

Denmark, Finland and Sweden have stressed in a joint statement that any solution must be reached through the OECD. Those northern objections had already blocked an earlier EU proposal for a digital services tax in 2019, when the ECOFIN Council failed to achieve unanimity. Tax decisions in the EU require unanimity from all member states, which makes reaching a common position difficult.

The European Parliament backs pressure from France to push for EU-wide measures. French minister for European affairs Benjamin Haddad is openly advocating a joint approach. That tension between the Parliament, the proponents of an EU-wide levy and the more cautious member states has characterised the debate for years.

What an EU-wide levy could generate

A European digital services tax could generate substantial tax revenues, although estimates vary widely. An earlier 2018 assessment of a 3 per cent charge on relevant digital services put the annual yield for the EU at between €4.7 billion and €6 billion. Broader variants, with a wider scope, are estimated to raise between €20 billion and €43 billion per year through to 2028, equivalent to 10 to 22 per cent of the current EU budget.

By way of comparison, VAT contributions to the EU budget amounted to approximately €20 billion in 2022. American tech companies already pay nearly $3 billion per year in national digital services taxes across various countries, a figure that could double by 2030 if the current patchwork of national levies remains in place.

Von der Leyen has previously mentioned the possibility of a tax on the advertising revenues of large digital platforms as a conceivable European variant. The Commission has not yet developed that idea into a concrete proposal.

What this means for the European tech and startup scene

For European founders, investors and policymakers, the outcome of this debate is not neutral. A fragmented tax landscape in which ten European countries each operate their own digital services tax increases the administrative burden for tech companies operating across borders. An EU-wide approach would simplify that, but at the same time puts the competitive position of the European digital ecosystem at risk if rates and thresholds are not carefully calibrated.

Economists such as Cristina Enache of Tax Foundation Europe point out that digital services taxes are typically passed on to users and advertisers, rather than being absorbed solely by the major platforms themselves. That also affects smaller European companies that rely on digital advertising platforms for their reach. The outcome of the OECD negotiations at the end of 2026 will therefore serve as a concrete benchmark for the tax environment in which European tech companies will operate in the years ahead.