Behind the tough rhetoric, cracks are starting to show within the EU itself. While member states publicly support the idea, several governments are quietly wary. And for good reason.
Von der Leyen’s tax proposal is being pitched as a way to show strength, particularly after former U.S. President Donald Trump took aim at the EU, calling it “pathetic.” But in reality, the plan might be more about sending a message than making actual changes.
Germany’s finance minister, Jörg Kukies, didn’t mince his words last week. “There simply aren’t enough alternatives to American tech in Europe,” he said.
He’s talking about everything from cloud infrastructure to AI tools. European firms rely on U.S. giants like Google, Meta, and Amazon for digital services. So, if the EU taxes them? It could just end up hurting its own businesses.
Kukies’ blunt statement reportedly ruffled feathers at a closed-door meeting in Warsaw, with ECB President Christine Lagarde accusing him of weakening the EU’s negotiating hand.
Still, many experts agree with him. The EU might aim at Silicon Valley, but it could hit its own foot instead. Let’s say the EU wants to go ahead with the tax. Actually doing it? That’s a whole other challenge.
Changing tax code policy in the EU requires unanimous support from all 27 member states. That’s a tough ask—previous attempts to introduce digital services taxes have fallen flat for this very reason.
To bypass that, von der Leyen floated an idea: use the EU’s Anti-Coercion Instrument, a kind of legal pressure tool. But there’s a catch—it hasn’t ever been used, and it’s unlikely to apply here.
Most of these tech-finding firms have large bases in EU countries like Ireland and Luxembourg. That makes them tricky to target without causing trouble at home.
Even if the EU wanted to tax goods sold online from U.S. sellers to EU buyers, the logistics are messy. As economist Bertin Martens put it: “You’d have to figure out exactly who the U.S. sellers are on platforms like Amazon. That’s not easy.”
Ireland isn’t just unsure about the plan—it’s firmly against it. Taoiseach Micheál Martin said over the weekend that Ireland would “resist” the proposal, warning it would be like “putting petrol on the fire.”
And it’s easy to see why Ireland’s nervous. The country has built its economy around hosting U.S. tech giants. It also exported over €44 billion worth of pharmaceuticals to the U.S. in 2024.
Aidan Regan, a political economist from University College Dublin, explains: “Ten companies contribute around 60% of Ireland’s corporate tax revenue. Most of them are American multinationals.”
That kind of reliance makes Ireland vulnerable—and extremely cautious. While the EU debates digital taxes, the U.S. has reopened discussions with the OECD on a broader global tax deal.
One major sticking point remains: how to fairly tax multinational companies in countries where they actually make money. The U.S. hasn’t signed off on this yet, but there’s movement.
In a sign of compromise, EU officials are now drafting new proposals to address American concerns. It’s a delicate dance, but one that could avoid direct confrontation.
Pascal Saint-Amans, a former OECD official, summed up the American view: “They’re basically saying: don’t touch U.S. company profits—whether they’re under-taxed at home or abroad.”
If that demand is met, the U.S. might be more open to negotiating the rest. Let’s be clear—von der Leyen’s digital tax threat isn’t just about money. It’s about pressure.
She’s trying to force Washington to the negotiating table. And with Trump back in the picture, she knows tough talk might be the only way to get his attention. But it’s a risky move. If the U.S. decides to retaliate, things could spiral fast.
The European Central Bank has already done the maths. A trade war triggered by U.S. tariffs could knock 0.3 percentage points off eurozone growth in the first year. If the EU hits back, that could climb to 0.5 points.
That’s a big hit at a bad time. Even von der Leyen appears to be easing up on the rhetoric. In a recent interview, she stressed: “We are setting out our position clearly, and the Americans are doing the same. That’s how negotiations work—nothing is agreed until everything is agreed.”
Von der Leyen’s tech tax proposal is bold. It’s also highly unlikely to happen, at least in the way it’s been presented. The EU is divided. The legal tools are untested. And the economic risks are real.
So is this about changing policy? Or just creating pressure? For now, it looks like a strategic bluff—a warning shot, not a done deal.
