Big Tech & Taxes: Why Australia should consider a DST (Digital Services Tax)
- Gov+AI
- Aug 27
- 3 min read
At the recent Productivity Roundtable there were calls for cuts to corporate tax, and we know the income tax burden is contributing to generational inequality. At the same time, as digital platforms increase their dominance, governments around the world are grappling with how to ensure tech giants contribute fairly to public finances. In Australia, global tech giants—including Google, Amazon, Meta (Facebook), and Apple—only paid a combined total of approximately $254 million in corporate tax for the 2022–23 financial year, despite generating an estimated $15 billion in local revenue. Revenue that is on the increase. That’s an effective tax rate of less than 2%- far below Australia’s statutory 30% corporate tax rate, largely due to profit-shifting and the booking of profits in lower-tax jurisdictions.
Australia’s Tax Gap: A Closer Look
Google Australia paid about $124 million in taxes on $2 billion of income in 2024, despite higher estimated gross revenue, much of which was routed through offshore entities.
Meta (Facebook) Australia paid just $18.2 million in taxes on $1.15 billion in revenue (2022), with over 91% of its income classed as non-taxable due to accounting practices.
Apple Australia paid $142 million in taxes on local income, a small fraction of its gross revenue due to international profit-shifting strategies.
These figures highlight the limitations of traditional corporate tax models in the digital age.
The Conversation recently explained why Australia is currently in this predicament:
“After the second world war, Australia entered into tax treaties so foreign companies selling to Australian customers would no longer be taxed here… As the world moved to digital products this century, it became easy for giant multinational enterprises offering advertising on social media (such as Facebook and Instagram), advertising on search platforms (Google), and streaming services (Netflix) to provide those services from abroad…. However, treaty renegotiation is slow and complex. So several European countries, beginning with France in 2019, came up with a short-cut solution.”
To respond to these modern day challenges, Europe offers some options.
DSTs Across Europe
France was one of the first to implement a DST, introducing a 3% levy in 2019. Italy, Austria, Spain, and Turkey followed suit, each with their own versions targeting digital advertising, social media, and online intermediation.
France collected €680 million in DST revenue in 2023 and expects €780 million in 2024.
Italy, Austria, and Spain report similar figures, with DSTs covering services like video streaming and music platforms.
These taxes apply regardless of where the company is headquartered, addressing the loophole that allows digital firms to avoid local taxation.
The UK’s Digital Services Tax: A Case Study
In April 2020, the United Kingdom introduced a 2% Digital Services Tax (DST) on revenues from search engines, social media platforms, and online marketplaces. Companies are liable if they earn more than £25 million in UK digital revenues and over £500 million globally.
According to Tax Justice UK, about 90% of DST revenue comes from just five companies—Amazon, Meta, Google, and others—making it a de facto “Big Tech Tax”. In its first year, only 18 companies paid the DST, and more than a dozen paid more in DST than in corporate tax. Amazon, for instance, paid no UK corporate tax in 2020/21 but met its DST obligations in full.
The DST currently raises around £800 million annually and is projected to reach nearly £1 billion per year by 2027. Advocacy groups and political parties have proposed increasing the rate to as much as 10% to boost revenue and curb tax avoidance.
Challenges and Global Negotiations
DSTs were introduced as interim measures while the OECD and G20 negotiated a global tax framework known as the “Two Pillar Solution.” Pillar One proposes reallocating taxing rights so that profits are taxed where users are located. However, negotiations have stalled, and DSTs remain in place.
The United States has criticised DSTs for disproportionately targeting American firms. In 2024, the U.S. Treasury reported that Pillar One could reduce federal receipts by $1.2 billion.
Why DSTs Matter
DSTs are more than just revenue tools, they ensure that companies profiting from domestic users contribute to public finances, especially as governments face rising costs in health, policing, education, and infrastructure. Also, as noted in the Tax Justice UK blog, DSTs have become essential for addressing tech tax avoidance and ensuring fairness in the digital economy, something which is currently lacking and governments are paying the price for.
Time for Australia to Act
Australia’s current tax receipts from Big Tech fall short of what’s fair. With billions in revenue generated locally, the case for a Digital Services Tax is stronger than ever. Learning from the UK and Europe, Australia could design a DST that ensures tech giants contribute proportionately to the public services their users rely on.
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