Meta and TikTok win the legal battle against the EU over tech taxes

The European General Court has sided with Meta Platforms and TikTok in their challenge against the supervision fee imposed by the European Union under the Digital Services Act (DSA) of 2022. Finally, someone stands up to these bureaucrats!

According to my analysis of the ruling, the court determined that the method of calculating the rate was flawed and disproportionate, something that had been obvious for a long time to those of us closely observing this sector.

A well-deserved victory for digital platforms

On Wednesday, the big tech companies achieved what many of us considered inevitable: the second highest court in Europe backed their arguments against that abusive tax that aimed to take 0.05% of their annual global net revenues.

This fee, supposedly intended to cover the costs of the European Commission for monitoring compliance with the regulations, affects 18 companies. But the problem is that it is calculated based on the average number of monthly active users and depends on the profit or loss margin of the previous financial year.

The arguments that convinced the court

In June, both Meta and TikTok presented compelling arguments. Meta denied avoiding paying its fair share of the fee but questioned how the Commission had calculated the levy, claiming it was based on the income of the entire group and not the specific subsidiary.

Meta's lawyer, Assimakis Komninos, highlighted the regulators when he stated that his client still did not know how the rate was actually calculated. The provisions in the DSA "go against the letter and spirit of the law, are completely opaque, and have led to completely implausible and absurd outcomes."

TikTok shared similar positions. Its lawyer Bill Batchelor was straightforward: "What has happened here is anything but fair or proportionate. The rate has used inaccurate figures and discriminatory methods, inflates TikTok's fees, and forces it to pay not only for itself but for other platforms."

Batchelor even accused the Commission of counting users twice, which is discriminatory because it means that users switching between their mobile phones and laptops would be counted twice. A true regulatory nonsense!

Lorna Armati, a lawyer for the Commission, attempted to defend the indefensible by arguing that "when a group has consolidated accounts, it is the financial resources of the group as a whole that are available to bear the burden of the fee." A weak argument that did not convince the court.

The full ruling is expected next year, but this already represents a significant blow to the EU's revenue ambitions in the digital sector, where it seems more interested in collecting than in creating a truly fair framework.

Technology investors should pay attention to how this situation evolves, as it could set a precedent for the EU's ability to impose similar levies in the future.