Why some US Republicans want to punish Australia over new charges for tech giants

Douglas Rissing/Getty Earlier this month, the federal government passed laws to encourage tech giants to pay Australian news businesses for journalism.

This is known as the News Bargaining Incentive .

For companies earning A$250 million or more in annual Australian digital advertising revenue (likely to include Meta, Google and TikTok), the scheme imposes a 2.75% charge on this revenue .

That’s unless they have entered into commercial agreements with Australian media, to fund them directly.

I’ve previously argued in The Conversation the proposed scheme looked remarkably like a “ digital services tax ” – precisely the kind of tax United States President Donald Trump has threatened to retaliate against.

I ended with a question: would Trump notice? We now have an answer.

In April, the Trump administration characterised Australia’s approach as “ foreign extortion ”.

Even though the new laws do not explicitly single out any country, US technology companies and industry groups have also attacked the measure as discriminatory .

With some US Republicans recently calling for retaliation against “ loser country ” Australia, do their criticisms of this tax have any merit? And what could happen now these measures are law? Read more: New laws to make tech companies pay for news will help, but there are 4 key problems Tax rules designed for a different world To understand the US reaction, we need to go back to a basic rule of international taxation that is about a century old – the notion of “separate accounting”.

The idea is countries tax companies based on where they carry out the activities that generate their profits.

Such activities could include developing technology, designing and manufacturing products, and marketing and distributing them.

By contrast, the fact that a company has customers or users in a country has traditionally given that country only limited rights to tax the company’s profits.

This made more sense when the rules were developed, but technology has since weakened that connection.

A company can now provide online services, sell advertising and reach millions of Australians, while carrying out most of its business activities overseas with no physical “presence” in Australia.