BRUSSELS — The Polish government aims to complete work on a digital tax by the end of the year, despite threats by U.S. President Donald Trump against countries with such a tax. “Work is currently underway to prepare the draft bill, which is expected to be completed by the end of 2025,” a spokesperson for the Polish Digital Ministry said in written remarks shared with POLITICO when asked about Trump’s comments. On Monday, Trump threatened to impose tariffs on countries with a digital tax. Digital taxes are “designed to harm, or discriminate against, American Technology,” Trump said in a post on his social network, Truth Social. However, the ministry said in the remarks, the Polish digital tax would not be “aimed at entities from any specific country.” “It is intended to apply to all relevant market participants.” As it stands, Warsaw intends to introduce a 3 percent digital tax rate on companies whose global revenues exceed €750 million, effectively targeting larger U.S. tech companies. The goal of such a tax is to ensure that tech companies “generating revenue from the Polish market pay fair taxes in Poland.” Earnings from the tax would be used to support the development of Polish technology and the creation of quality Polish media content. Services that could fall in scope are marketplaces, digital targeted advertising and data transfer services. Efforts to come up with a Polish digital tax, led by left-leaning Digital Affairs Minister Krzysztof Gawkowski, could face resistance from Karol Nawrocki, Poland’s Trump-loving president.

BRUSSELS ― The European Commission has dropped plans to levy a tax on digital companies, a move that hands victory to Donald Trump and U.S. tech giants like Apple and Meta. With the EU and the U.S. embroiled in the final stretch of negotiations over a trade deal, Brussels removed the digital tax option from its ― supposedly unrelated ― list of proposed taxes for bringing in revenue during its next seven-year spending program, according to a document circulated on Friday seen by POLITICO. With only days to go until the budget plan is unveiled, top EU officials are locked in high-stakes talks to decide which levies will feature in the Commission’s proposal, to be published on Wednesday, for the budget starting in 2028. The document, which still could be revised by officials before publication, set out a list of possible taxes but did not quantify how much money each one would likely generate. Deciding against a digital levy would be a major turn-around for the EU, which as recently as May floated taxing tech giants as a way of paying back the bloc’s debt. The idea was mentioned in a document on the next budget discussed by the EU’s 27 commissioners. The U-turn could be a strategic move by the EU, which is desperate for advantageous terms on trade with the U.S. President Donald Trump threatened tariffs against Canada as payback for their digital levies. WHAT THE NEW EU TAXES COULD BE The issue of the EU raising its own taxes has always been a sensitive one, with national governments wary of giving the bloc too much power to extract money from their voters and too much autonomy over how it spends it. The vast majority of EU funds comes from governments’ contributions. But with politicians increasingly demanding Brussels tighten the purse strings, the Commission is on the lookout for new sources of cash. According to Friday’s document, instead of a digital levy it wants to propose three new taxes targeting electric waste, tobacco products and large companies in the EU with a turnover of over €50 million. The aim is to generate from €25 to €30 billion per year that will be used to repay EU joint debt that was used to finance its post-Covid recovery. The Commission will propose an EU-wide levy on tobacco products such as cigarettes and cigars. These goods are currently being taxed by individual countries, who keep the revenues for themselves. The EU’s idea comes amid a push to introduce new taxes on e-cigarettes and vapes that are opposed by Italy, Greece and Romania. | Tolga Akmen/EPA The EU’s idea comes amid a push to introduce new taxes on e-cigarettes and vapes that are opposed by Italy, Greece and Romania. While not opposing the proposed new taxes, Sweden said that handing part of its national revenues to the EU is “completely unacceptable.” The Commission also suggests taxing discarded electrical equipment. Wednesday’s proposal is expected to also confirm proposals from 2021 to levy a carbon border tax ― a popular idea among countries ― and a take share of the revenues generated by the emissions trading scheme (ETS). This idea is politically sensitive among Eastern European countries who are most affected by ETS. In a concession to critics, the Commission suggested that only a small share of ETS revenues will flow to the EU budget, while the rest would stay with national governments. It added that a controversial plan to extend the scheme to buildings and road transport ― known as ETS2, which will come into force in 2027 ― won’t be funneled into the EU budget. National governments will have to unanimously approve the new taxes over two years of fraught negotiations that will start after the Commission makes its proposal.  

BRUSSELS — Donald Trump called the European Union pathetic, so the EU set its sights on Silicon Valley to prove him wrong. European Commission chief Ursula von der Leyen has come out swinging with a threat to tax the advertising revenues of digital services if trade talks with the United States president collapse. Few diplomats will dare say openly that von der Leyen’s move to target Big Tech is a bad idea. Most national capitals are publicly backing her in a bid to strengthen the EU’s hand in negotiations with Washington. But beyond the veneer of unity, countries including Germany and Ireland are already balking at the Commission’s threats, and behind the scenes others are growing queasy. Among the worries are that new digital levies would hit European entrepreneurs harder than Silicon Valley tech moguls and that escalating a trade war could drag EU economies under. POLITICO unpacks five reasons why von der Leyen’s threat is — at least for now — more bluster than substance. 1. THERE IS NO ALTERNATIVE Remember when German politicians used alternativlos — “There Is No Alternative” — to sell painful spending cuts to southern countries during the eurozone crisis? They’re using the same logic to warn against the digital advertising tax. The argument is that EU companies will continue relying on big U.S. tech firms like Facebook or Google for their advertising because there is no viable alternative based in Europe.  “If you look at data centers, if you look at the cloud, if you look at artificial intelligence data centers, unfortunately, there simply aren’t sufficient alternatives to the offerings by the American digital industry,” Berlin’s Finance Minister Jörg Kukies told reporters last week. That would mean an EU move to hit U.S. tech firms would only ricochet right back to European businesses and buyers. His brazen remarks irritated European Central Bank President Christine Lagarde, who accused Kukies of undermining EU unity for negotiations during a closed-door meeting of EU finance ministers in Warsaw, three officials told POLITICO. European Central Bank President Christine Lagarde accused Kukies of undermining EU unity for negotiations during a closed-door meeting of EU finance ministers in Warsaw. | Kirill Kudryavstev/AFP via Getty Images In fact, many experts agree with Kukies’ argument. “It’s difficult to impose such measures without harming too much EU consumers or EU firms,” said Bertin Martens from the Bruegel think tank. 2. THERE’S NO OBVIOUS WAY TO IMPLEMENT IT Adopting a digital tax is a legal minefield. Efforts to implement a broad digital services tax on company revenues have failed at every hurdle because changing tax policy requires unanimity among the EU’s 27 countries. To avoid this, von der Leyen suggested that digital services and advertising revenues in particular could be targeted through the so-called trade bazooka — the Anti-Coercion Instrument — which has never been deployed so far. The ACI, however, can’t be used against companies with a strong presence in Europe, Martens said. Most digital firms fall into this category because they are registered in EU countries such as Ireland (Apple, Microsoft, Google, Meta) or Luxembourg (Amazon). There is a way around this. The EU could take aim at goods being sold online from U.S. sellers to European buyers, but that seems impractical. “In order to do that, you will have to identify who are the U.S. sellers on the platform that [for example] Amazon will sell to EU consumers. And that’s much harder to do,” Martens said. 3. IRELAND’S OPPOSITION Ireland has much to lose from any levy on tech firms and has already defied the move publicly. Irish Taoiseach Micheál Martin said over the weekend that the country would “resist” von der Leyen’s proposals. Putting a new tax on top of strict EU regulation on Big Tech would be “putting petrol on [the] fire,” he said. Ireland is among the European countries most exposed to a trade war with the U.S. because it hosts subsidiaries of U.S. digital giants and also exported over €44 billion worth of pharma products to America in 2024. “Ireland has an extremely concentrated corporate tax base, which is heavily reliant on U.S. multinationals in particular,” said Aidan Regan, a professor of political economy at University College Dublin, in an interview. Ten firms account for 60 percent of Ireland’s corporate tax revenue and around 30 percent of its total tax revenue now comes from the corporate sector, according to Regan. “In terms of how the EU responds to all of this, Ireland is also quite squeezed,” he said.  4. THE PROMISE OF A GLOBAL TAX DEAL The U.S. has in recent days signaled to the Organization for Economic Cooperation and Development that it wants to reopen discussions on a global tax deal. Washington never signed up to the part of the agreement aimed at making Big Tech groups and multinationals pay more tax in the countries where their customers are based, meaning that section of the deal has not yet been agreed. Von der Leyen’s threat to impose new tech taxes — beyond those already levied by individual EU countries — might prompt Washington to seek a global solution. In an interview with the FT, OECD Secretary-General Mathias Cormann said the U.S. is actively engaging in discussions. In a sign of openness, the EU’s 27 ambassadors on Wednesday entrusted tax officials to draw up new proposals in a bid to soften Washington’s concerns over a separate part of the agreement, an EU diplomat said. U.S. officials oppose a mechanism that allows the signatories of the agreement to claw back tax revenues from companies that are paying less than the 15 percent global tax rate in other jurisdictions. “They’re basically saying: ‘You don’t touch American profits whether they are undertaxed in the U.S. or elsewhere,” said Pascal Saint-Amans, a former top OECD official, referring to the U.S. “If we have satisfaction on that we’ll see what we do on Pillar I.” 5. ESCALATING WITHOUT DEESCALATING Von der Leyen’s strategy is a risky one — and she knows it. Threatening taxes against Big Tech is meant to bring Trump to the negotiating table and encourage a trade deal. “The guy [Trump] is all about deals. So you are pushed to do something that you don’t like,” said Saint-Amans, referring to the proposed levy. But critics fear that things could go differently. Digital taxes might prompt a counterreaction from the U.S., which might spiral into a full-blown trade war with Europe. That would hit growth across the bloc and especially in countries such as Germany and Italy that are heavily reliant on exports to the U.S. The ECB estimates that unilateral U.S. tariffs would hit the eurozone’s growth rate by 0.3 percentage points in the first year and by as much as 0.5 points if the EU retaliated in kind. Von der Leyen knows as much, and has this week seemingly softened her rhetoric. “We are setting out our position clearly, and the Americans are doing the same. And that is the essence of any negotiations: nothing is agreed until everything has been agreed,” she said Wednesday in an interview with Die Zeit.

LUXEMBOURG — The European Union is negotiating with a trade bazooka in its hand, but can’t agree on whether to pull the trigger just yet. Beyond a carefully-crafted message of a “proportional” and “united” response from all of the bloc’s trade ministers at their meeting in Luxembourg on Monday, the key question of how to respond to Donald Trump’s trade broadside threatens to open cracks in the bloc’s fragile cohesion. European Commission President Ursula von der Leyen, speaking in Brussels just as the trade ministerial was wrapping up, made it clear that the EU wants first to negotiate. The EU was offering a “zero-for-zero” tariff scheme on industrial goods, she said, covering autos, drugs, chemicals, plastics and machinery among other things.  That’s the carrot. (And it’s a fairly easy carrot to dangle as transatlantic industrial tariffs have traditionally been low.) When it comes to sticks, the EU wants to create the impression that it is negotiating from a position of strength (while hoping that the financial market turmoil unleashed by Trump’s tariff broadside will sap his fighting spirit). But EU capitals are divided over exactly which one they should use. The Anti-Coercion Instrument (ACI), a nuclear option which has yet to be deployed in practice, would empower the EU executive to hit U.S. service industries such as tech and banking.  Trump’s tariffs — which would affect €380 billion worth of EU exports — are exactly the kind of economic bullying that the EU had in mind when it designed the ACI. But just because his “reciprocal” tariff of 20 percent on all EU goods is imminent (along with 25 percent levies on steel, aluminum and autos already in force) that doesn’t mean the 27-nation bloc is ready to activate it. That, as one minister put it, would mean the bloc really is in a trade war. The Europeans view the arguments justifying Trump’s tariffs as fallacious on the face of them — these include considering value-added taxes, EU tech regulation and phytosanitary standards to be non-tariff barriers. And the formula used to calculate them is equally nonsensical: The EU charges average tariffs on industrial goods, for example, of 1.6 percent. The final list of countermeasures prepared by the Commission to respond to Trump’s steel and aluminum tariffs, which entered force on March 12, will not fully match their estimated impact of €26 billion on EU exports, Trade Commissioner Maroš Šefčovič said after the talks. That’s less than originally intended after EU countries lobbied to remove items — like Kentucky bourbon — from the original hit list.  ENOUGH IS ENOUGH  Countries such as France, Germany and Spain have led calls for the bloc not to take any options off the table in dealing with the U.S. president.  “One also has to look closely at [the Anti-Coercion Instrument],” Germany’s outgoing Economy Minister Robert Habeck said on his way into Monday’s meeting. “These are measures that go far beyond customs policy. They have a broad palette. They then include digital services, but have a wide range of instruments, much more than just via a digital tax.”  “One also has to look closely at [the Anti-Coercion Instrument],” Germany’s outgoing Economy Minister Robert Habeck said on his way into Monday’s meeting. | Jean-Christophe Verhaegen/AFP via Getty Images His Spanish counterpart Carlos Cuerpo agreed. “The Anti-Coercion Instrument is there for us to use it in case we find it necessary. But again, the message that the EU should just take today is a positive one,” Cuerpo told POLITICO in an interview. “We need to explore the use of all the instruments that are at our disposal. That’s for sure. We should not rule out anything.”  A senior EU diplomat aware of the meeting told POLITICO that when Šefčovič, the EU trade chief, took a straw poll on which tools Brussels should use, only a handful of EU ministers called for all options to be put on the table — including the trade bazooka.  “He wanted, of course, to test the member states’ unity and what instruments that were on the table. Most member states said that we were in favor of countermeasures if we were forced to,” the senior diplomat said. They noted that about 20 percent of countries called for the EU executive to make use of all the tools it had at its disposal, including the anti-coercion instrument.  Specifically, Ireland and Italy — whose pharmaceutical and wine sectors are in the eye of the tariff storm — were more cautious over escalating trade tensions with Trump.  Irish Foreign and Trade Minister Simon Harris expressed particular caution on invoking the ACI or targeting U.S. services. “I think if you were to get into that space it would be an extraordinary escalation at a time when we must be working for a de-escalation. It is in many ways the nuclear option if you start talking about the use of the Anti-Coercion Instrument and the likes,” said Harris, who flies to Washington on Tuesday. Italian Foreign Minister Antonio Tajani went as far as floating a delay of the entry into force of the EU’s countermeasures on steel and aluminum — from April 15 to April 30.  More broadly, Italian Prime Minister Giorgia Meloni, one of Europe’s leaders who is closest to Trump, is showing signs of wobbling on a range of issues — from trade to defense — where the bloc is trying to present a united front. She is due to visit Washington next week, Corriera della Sera reported.  NO WAY BACK When you put your most powerful trade weapon to the table so early on, it’s hard to take it off again when things turn really sour.  For one, the European Commission is due to take a decision on whether to fine Apple and Meta as soon as this week for violating the EU’s digital competition rules, in what could add fuel to the trade fire between Washington and Brussels.  “At this stage, I wouldn’t go into the precise definitions or the speculation on what kind of instrument we would use or how we would describe the reasoning for the use of this or that instrument,” Šefčovič told reporters during Monday’s closing press conference.  “Our response is very gradual, just reacting to steel and aluminium … It’s kind of stretched over time because we want to create the necessary negotiating space.  “At the same time, until now, despite our efforts and opening, we haven’t seen the real engagement, which would lead to the mutually acceptable solution,” the trade chief added. Additional reporting by Koen Verhelst, Laura Hülsemann and Ben Munster.

BRUSSELS — The American tech sector has a big, fat target on its back as Europe looks to respond to Washington on tariffs. If only Brussels agreed on how to hit it.  As United States President Donald Trump rolled out a roster of tariffs late Wednesday, European top officials and lawmakers noted that Big Tech firms and digital services could be Washington’s Achilles heel. The European Union has a €157 billion trade surplus in goods, which means it exports more than it imports, but it runs a deficit of €109 billion in services, including digital services. Big Tech giants like Apple, Microsoft, Amazon, Google and Meta dominate all sorts of parts of the market in Europe.  European Commission President Ursula von der Leyen mentioned technology as one of the “cards” the bloc can play when she addressed the looming tariffs in a European Parliament session on Tuesday.  But the EU is conflicted on what to do about it.  Its flagship tech laws like the Digital Markets and Digital Services acts (DMA and DSA) aren’t designed to serve as retaliation tools. Attempts to slap higher taxes on tech giants previously failed. Governments could decrease their spending on Big Tech firms by revising public procurement policies, but in many cases Europe doesn’t have its own alternatives to turn to instead. And some capitals, like Dublin, are already warning that hitting U.S. tech would badly damage the bloc’s own economy.  Directly targeting Big Tech is all but certain to trigger the ire of tech CEOs like Elon Musk, Jeff Bezos and Mark Zuckerberg, who have cultivated close ties with Trump.  Europe could also deploy its strongest trade weapon yet, the Anti-Coercion Instrument, to target U.S. tech firms specifically. But as a tool the ACI is untested: It was designed as a “trade bazooka” following the first Trump administration from 2017 to 2021 and has never been used.  LAWS VERSUS TRADE WARS The EU has yet to land some of the landmark probes it has been conducting under the DMA (on digital competition) and DSA (on content moderation).  The Commission is set to fine Apple and Meta for violating digital competition rules, the first such fines to be issued under the DMA, late this week or early next week.  Brussels has also found Elon Musk’s X in preliminary breach of the EU’s content moderation rules, which could result in fines of 6 percent of the company’s annual global turnover. Meta is also under investigation under the same rulebook.  Directly targeting Big Tech is all but certain to trigger the ire of tech CEOs like Elon Musk, Jeff Bezos and Mark Zuckerberg, who have cultivated close ties with Donald Trump. | Pool Photo by Demaree Nikhinson via Getty Images EU officials have been at pains to stress that enforcement under these laws shouldn’t be considered part of a trade war.  “The DMA is not a bargaining chip,” said French Renew lawmaker Stéphanie Yon-Courtin. “This regulation is conceived to establish fair rules of the game in Europe, not to be leveraged in a trade agreement with the United States.” The lead lawmaker on the DMA, Andreas Schwab of the center-right European People’s Party (EPP), said the Commission should have been quicker to issue its imminent decisions on Apple and Meta, precisely to show that “there is nothing political about them.” The core argument is that the EU’s tech laws exist to uphold European values, not to discriminate or to target a given country. Any suggestion to the contrary could hurt the Commission when Big Tech firms inevitably litigate the first fines and penalties under the laws. Washington, however, has suggested the opposite. The Trump administration in February threatened retaliatory tariffs against the EU tech regime specifically, citing perceived risks for U.S. companies and freedom of expression.  Wednesday’s tariff announcements from the White House have reupped calls for Brussels to pull the trigger on investigations under the rulebooks.   Since Trump is “open for negotiations, I fear that he will try to use the digital services as a negotiating tool. But I hope the European Commission will be firm,” Danish socialist MEP Christel Schaldemose said.  Greens lawmaker Alexandra Geese agreed: “Let’s strongly enforce DSA and DMA.”  TAXES AND LEVIES Proponents of a bullish response to Trump’s tariffs see several other forms of retaliation: slapping higher taxes on digital services, and excluding U.S. tech firms from bidding for government contracts. Brando Benifei, a social democrat lawmaker who leads the Parliament’s delegation to the U.S., flagged the need for “broad countermeasures that hit where it really hurts,” with “targeting services, such as big tech firms,” as one option. In a written comment he suggested retaliating against intellectual property rights or excluding U.S. companies from public procurement. Digital services will “inevitably come into focus,” said Finnish EPP lawmaker Aura Salla, who is also a former top lobbyist for Meta in Brussels. EPP President Manfred Weber said on Tuesday that the “digital giants only pay little to our digital infrastructure where they benefit so much.”  Some EU countries are adding to the chorus. On Thursday French government spokesperson Sophie Primas said the EU’s next wave of retaliation could target “digital services that are currently not taxed. ”  The Commission is set to fine Apple and Meta for violating digital competition rules, the first such fines to be issued under the DMA, late this week or early next week. | Oliver Douliery/Getty Images French liberal European lawmaker Sandro Gozi, meanwhile, mentioned “taxing American digital giants” as among the options.  The issue of a digital services tax has been simmering for a while in the EU, but the bloc’s 27 member countries have no unanimity on the issue, and taxation policy requires all EU countries to agree on joint policy. Some member countries have thus gone solo. Most recently, Belgium’s ruling coalition deal contained an agreement to install a digital tax by 2027 if there’s no deal at the international or EU level. Ireland, the European home base of several U.S. Big Tech companies, pushed back right away on Tuesday. Targeting U.S. digital services is not the EU’s position, said Irish Trade Minister Simon Harris, adding it could be very damaging for Ireland.  Gregorio Sorgi contributed reporting.