Australia’s progressive federal government threatened U.S. tech firms with a 2.25% tax on revenue if they do not voluntarily give up 1.5% of their Australian-sourced revenue to local news networks in perpetuity. The government announced it would submit the proposal to Parliament by July 2 for approval, where it will likely receive a warm welcome, given the Labour majority in both the Senate and House of Representatives. If approved, the law would take effect in the 2025-2026 fiscal year.
Australia’s proposal, known as the “News Bargaining Incentive” (NBI), is a novel form of a digital services tax that would extract revenue from US companies to benefit domestic firms. NBI specifically targets digital platforms that generate at least $250 million in Australia, meaning that only three American companies––Google, TikTok, and Meta, the parent company of Facebook and Instagram––are subject to the tax. A statement from Google rightly slammed the arbitrary nature of the threshold, and that it unfairly left out other similar firms such as Snapchat and Microsoft.
As Meta said in a statement on April 28, the proposal is little more than a discriminatory digital services tax (DST), which punish American businesses that provide online advertisement marketplaces. Such taxes are constitutionally dubious given that they target companies which the Australian government provides neither protection nor any institutional framework through which revenue can be generated.
Australian Prime Minister tried to frame the tax as an “investment” in journalism that was “critical” to the wellbeing of the country’s democracy. In practice, this means taking between $144 million and $179 million (the expected revenue from the news tax) from American companies and giving it to Australian ones, according to the Communications Minister Anika Wells. Handouts to local news networks taken from larger companies does far more damage to society by undermining free commerce.
Notably absent from those publicly calling for these taxes are the Australian news networks. That is perhaps because the news tax is a ruse for the government to snatch as much revenue from American companies as they can by punishing their success. No Australian companies pay such a tax for operating in America.
Not only is this proposed tax unfair and dishonest but will have far reaching economic consequences that ultimately injure the taxpayer. A report by the Tholos Foundation found that DSTs caused tech firms to simply pass the tax costs onto consumers by raising the prices of advertising charges and marketplace fees. Proponents of the news tax forget that when Canada introduced a similar law in 2022, Facebook blocked users from sharing news links, despite the fact that many people now get their news primarily from social media.
The Trump administration can take action to stop this tax before it becomes law. Under section 301 of the 1974 Trade Act, the United States Trade Representative can investigate and retaliate against foreign countries that unfairly burden American commerce. While President Trump has signaled his commitment to protecting U.S. business from DSTs, the U.S. government must act quickly to oppose this new tax, as lack of action could lead to other countries following suit with Australia.
President Trump should remind Prime Minister Albanese that, since the U.S. is a key ally to Australia in the Indo-Pacific, taking aim at U.S. commerce would damage the bilateral relationship and weaken security ties in the region. After all, extortion is no way to treat a friend.