French Constitutional Court Upholds DST – UK DST Remains Unchanged After U.S. Visit Key Developments
On 12 September 2025, France’s Constitutional Court upheld the French Digital Services Tax (DST), dismissing constitutional challenges brought by Société Digital Classifieds France.
The Court confirmed that:
- The revenue-attribution mechanism provides sufficient legal certainty.
- The tax does not infringe equality before the law, legal clarity, or freedom of enterprise.
- The two taxable service categories (digital intermediation and targeted advertising) are defined in an objective and rational manner.
The ruling secures DST’s legal foundation and confirms that the legislation introduced in 2019 remains fully intact.
In parallel, attention turned to London. In the run-up to the U.S. President’s 16-18 September visit, there was heavy speculation that the UK DST might be put on the table as part of trade and diplomatic discussions. Pressure came from different sides: civil society groups and NGOs campaigned vigorously for the UK to hold the line, arguing that withdrawing the DST would undermine fiscal fairness and deprive the exchequer of a revenue source seen as important for funding public services. At the same time, U.S. politicians urged the administration to use the trip to force the UK to roll back its DST, with 21 House Republicans supporting U.S. Congressman Ron Estes (R-Kansas) expressing his concerns over the UK's DST.
Despite this pressure, the visit ended with seemingly significant FDI pledges, but without concessions from the UK on its DST.
Why This Matters
The judgment goes beyond technical constitutional questions. It consolidates the DST as a reliable revenue stream in France. Besides the constitutional side, the verdict confirms that the tax does not stand in the way of upholding the application of the ability to pay principle. DST revenue has steadily increased since 2019 and are increasingly relevant in times of budgetary pressure. In fiscal terms, this makes repeal or suspension politically costly. With OECD Pillar One negotiations stalling and the “standstill” on new unilateral measures having expired, France has little incentive to step back.
The UK DST leaving the Trump visit unscathed underscores that political pressure and bilateral diplomacy, even at the highest level, may not be sufficient to dismantle an established DST (yet) not sufficient to dismantle an established DST. Taken together with the French court ruling, this represents a second important win for the durability of DSTs, at least for now. Eyes will now be on the UK’s scheduled DST review later this year, which may also be a good moment to consider adjustments that make the tax more palatable and workable by, for example, addressing double taxation concerns.
European and Global Ripple Effects
France and the UK are not alone. Italy recently broadened its DST by removing domestic threshold, Spain keeps enforcing its DST. Canada stands out as an exception, having legislated a DST in 2024 but announcing in June 2025, under U.S. trade pressure, that it would halt collection and move to rescind the tax. The constitutional confirmation in France does not fully factor in this geopolitical threat, nor does the UK DST’s survival. President Trump taps from every opportunity to keep challenging DSTs. For companies, this remains the main external uncertainty: not only whether DSTs continue to exist, but also whether compliance with them triggers trade consequences in U.S.- EU supply chains.
Longer-Term Reform Pressures
If DSTs are to remain in place for an extended period, as now seems likely, the next policy challenge is how to make them more sustainable. Experience over the past years has highlighted structural shortcomings, particular in the context of double taxation. Because DST are levied on gross revenues, without a credit or offset against corporate income tax, companies can face effective taxation far above policy intentions. An emerging debate will therefore be whether jurisdictions should adapt their DSTs, perhaps by introducing a credit or deduction mechanism, to reduce frictions and align them more closely with international norms, until a global solution is implemented.
Why Getting in Touch
With these recent developments, DSTs look set to remain part of the international tax landscape for the shorter term. The pressing question now is not whether they survive in the short term, but what a more balanced iteration would be. As an immediate action, there are avenues to ease frictions such as double taxation and cost pass-throughs. Over the longer horizon, we see scope for a more durable and global solution, one that links companies’ access to digital ecosystems with fair and predictable contributions, and that recognizes the importance of sustaining investment.
We would be pleased to share our thinking on both tracks, pragmatic measures for today, and a forward-looking “ecosystem access” approach that could provide a more stable bridge to multilateral reform. If this is of interest, let’s continue the conversation.
