SYDNEY, June 4 (Reuters) – Meta accused Australia of violating a free trade agreement with the U.S. by proposing a new tax on certain tech giants which do not strike ‌licensing deals with local media, escalating a dispute which has simmered for half a decade.

The $1.6 ‌trillion Facebook and Instagram owner said a proposal to tax platforms 2.25% of all Australian revenue – including revenue unrelated to social media – ​was “indefensible” and went further than actions which had prompted a response by the U.S. government.

Meta has previously said it opposed the so-called news bargaining incentive, for which Australia’s centre-left government has published draft legislation. But its latest missive shows how the law risks stirring up geopolitical tension between the allies.

The tax “plainly violates the commitments ‌Australia and the United States made ⁠in their bilateral Free Trade Agreement, which commits Australia to grant American companies ‘treatment no less favourable’ than Australian peers”, Meta said in a blog post published on ⁠Thursday.

By drawing on the tech firms’ total domestic revenue, the Australian tax was “even broader than existing digital services taxes enacted by some governments which resulted in the United States initiating trade actions”, the post added.

“We encourage any government ​considering ​a similar approach to look carefully at what this ​model actually represents.”

A spokesperson for Assistant Treasurer Dan ‌Molino, who would be responsible for overseeing the tax, was not immediately available for comment.

The issue of making social media companies reimburse news outlets for content that drives clicks has been a point of contention between Australia and Meta since 2021, when the country became the first to pass a law forcing the platforms to negotiate deals or face government arbitration.

After briefly blocking all news feeds in Australia, Meta ‌agreed on deals with most major outlets but in 2024 ​said it was stopping paying for news. Instead of installing ​an arbitrator, the government said it would switch ​to a new model of charging a tax instead.

It also expanded the list ‌of companies it applied to, from Meta and ​Google to Meta, Google ​and TikTok. Google had struck deals under the previous model but has previously said it opposes the proposed tax.

Under the current Trump administration, Australia’s effort to regulate mostly U.S.-based tech firms has ​emerged as a flashpoint. A U.S. ‌congressional committee has called for Australia’s internet regulator to testify about what it has called ​a regime of censoring American free speech.