Legal Update: They Tax the Phone, the Data, and the Service
Taxes on digital service providers can be costly and occasionally prohibitive. These crippling taxes raise costs and limit access to digital services in poor communities.
Digital services feel like they should be getting cheaper, but in many countries, the opposite is happening. Hidden taxes on everything from streaming (e.g., Netflix and Amazon Prime) and mobile data to smartphones are being used systematically to make digital services costly for some of us. This newsletter takes a closer look at how digital services taxation works, who really pays, and why these rising costs are affecting some communities more than others.
A Reflection on Digital Services Tax
We cannot really embark on discussing the digital services tax system without first analysing the expansive report recently published by the International Telecommunication Union (ITU) in April 2025.
It is necessary to note that the World Telecommunication and Information Society Day (WTISD) was observed on 17 May 2025, marking the 160th anniversary of the International Telecommunication Union (ITU) founded in 1865.
The WTISD is noteworthy in information and communication technologies (ICTs) as a day celebrated to support global connectivity and telecommunication development efforts. It highlights a longstanding commitment to bridging the digital divide and promoting inclusive digital transformation.
The 2025 WTISD theme, "Gender Equality in Digital Transformation," focuses on the need for inclusive policies that address disparities in digital access and participation. This focus aligns with the ITU's broader objectives of ensuring that technological advancements benefit all segments of society, particularly marginalised groups. Legal measures play a crucial role in this context, as they can mandate equitable access, protect digital rights, and promote diversity in the tech industry.
The ITU's April 2025 report on digital services taxation, the main focus of this newsletter post, further illustrates the objective. The report highlights how certain tax laws can inadvertently increase the cost of access to digital technologies, thereby exacerbating the digital divide. The ITU advocates for legal reforms that balance revenue generation with the need to make digital services affordable and accessible .
WTISD encourages international cooperation in developing legal frameworks that support innovation while safeguarding the rights and interests of all users (i.e., consumers).
The ITU's April 2025 Digital Services Tax report provides one of the most comprehensive analyses to date, comparing how taxes affect both providers and users of digital platforms and telecommunications services.
The report explores a wide range of tax types.
These include general corporate taxes such as profit tax and value-added tax, as well as sector-specific charges like regulatory fees, spectrum licence costs, and import duties on network equipment and consumer devices.
It also looks at taxes applied directly to digital platforms and to the consumption of services such as internet access, mobile data, and streaming subscriptions.
Rather than taking a narrow or technical view, the ITU’s report investigates how these taxes influence the real-world cost of accessing digital tools and services. It reveals major inconsistencies in how different countries apply these taxes, and it highlights the risks high taxes pose to affordability, digital inclusion, and infrastructure investment.
Through its findings, the report provides governments and regulators with practical insights into how smarter tax design could support a more equitable and connected digital future.
This newsletter provides an in-depth critique of the ITU Digital Services Tax report for the benefit of consumers who use digital services daily with limited knowledge of undisclosed taxes associated with their use.
🤔 What is a Digital Services Tax (DST)?
Digital Services Tax, often called DST, is a type of tax that governments apply to companies offering digital services.
These include online advertising, video streaming, e-commerce platforms, social media, and other services that operate through digital networks.
DST targets the revenue generated by these services within a country, even if the company offering them is based elsewhere.
The reason many governments have introduced DST is to address what they see as a gap in the traditional tax system. Digital companies can operate and earn significant income in a country without having a physical presence there.
Under older tax rules, this allowed them to pay very little or no tax in the countries where they had many users or customers. DST aims to correct this by taxing part of their revenue locally.
DST usually applies to gross revenues, not profits.
This means the DST is calculated based on the total income from digital services, without considering expenses. It is generally aimed at large multinational companies, especially those with global operations and high revenues.
For example, a country may only apply DST to companies earning over a certain amount globally and locally.
While the tax is collected from the companies, the impact often reaches consumers. Companies may increase prices or reduce services in markets where DST is applied. This means consumers might pay slightly more for subscriptions, products, or digital ads, depending on how companies respond to the tax.
There is no global agreement on DST. Each country applies its own rules, tax rates, and thresholds.
In France, for example, the DST rate is 3 percent. The United Kingdom applies a 2 percent rate on digital services used by UK residents. India introduced a tax called the Equalization Levy, focused on foreign digital providers.
The debate around DST continues. Some countries see it as a fair way to collect revenue from global tech companies. Others believe it creates trade tensions and complicates international tax cooperation. Still, the number of countries introducing DST continues to grow.
🛜 Online Streaming, Surfing, and Paying: How You Are Already Being Taxed
Digital taxes affect how we pay for online services. Consumers are now paying more for everyday digital activities such as watching films, listening to music or making voice calls through the internet. These taxes are quietly included in subscription fees and service bills, making digital services more expensive.