Tech companies are invoking Australia’s free trade agreement with the US and threats of Trump administration retaliation in an attempt to kill off the federal government’s proposal to force them to pay news companies.

The news media bargaining incentive is designed to force Meta, Google and TikTok to make commercial deals with Australian media outlets or pay a dedicated 2.25% levy on local revenues.

The Albanese government has been consulting on the draft legislation since April, with submissions closing late last month.

Meta, the parent company of Facebook, Instagram and WhatsApp, has argued that the news media bargaining incentive is a “discriminatory tax” that is “poorly designed” and “grossly unfair”.

It released its formal submission to the draft legislation on Thursday morning, and said it would insulate publishers from competitive pressures by guaranteeing revenue. The company again argued that news organisations share their content on Meta platforms for free because they get commercial benefits.

Meta said the NBI was a “discriminatory, retroactive tax targeting a handful of foreign companies while competitors offering comparable services face no equivalent obligation”.

It “plainly violates” the US and Australia free trade agreement, Meta claimed

Meta’s position has been echoed by US tech lobby groups, who in letters to the government last month also cited the agreement. The National Foreign Trade Council, which represents US multinational tech companies, said the bill created a disincentive for growth for digital platforms and was potentially in violation of the agreement.

“Legal analysis suggests the draft bill will result in potential inconsistencies with prohibitions against discrimination against US services and service suppliers under its national treatment and most-favored-nation rules; discrimination against digital products; and performance requirements, including a requirement to “achieve a given level or percentage of domestic content,” the trade council said.

The Software & Information Industry Association said the incentive would “likely run afoul” of Australia’s obligations in the trade agreement concerning cross-border trade in services, electronic commerce and investment and would be the “type of measure that the Trump administration has said it might retaliate against”.

The organisation said the bill was built on a flawed premise, and most major media companies appeared to be economically viable.

News Corp Australasia’s executive chair, Michael Miller, said the bill cleared a pathway for tech companies to make commercial agreements with news media.

“Meta’s strident opposition to the incentive once again reveals its readiness to go to extreme lengths to not pay for the content it profits from combined with deep contempt for Australian law and standards of behaviour,” he said.

Nine Entertainment’s chief executive, Matt Stanton, said the bill would be “completely unnecessary if these companies simply adhered to existing Australian law” and bargained under the news media bargaining code.

“To suggest it’s a disincentive to investment to require companies to follow Australian law is disingenuous,” he said. “It’s time these companies stopped riding roughshod over the Australian public, respect our laws and pay their fair share.”

The Southern Cross chief executive, Rohan Lund, said the government asking for platforms to pay for news content was not unfair.

“Quality news is vital for a diversity of voices in a healthy democracy,” he said. “If digital platforms don’t pay for the use of the news content they profit from, then journalism becomes unsustainable.”

Scott Purcell, a co-founder of Man of Many, called for amendments to the proposed bill to ensure that the funding was distributed among all newsrooms, not just the major players, and that it was used directly to fund journalists.

Meta said the bill wasn’t a plan to save journalism but “a tax on innovation dressed up as media policy” to which it was “vehemently opposed”.

The company argued that most people now come to its platforms for “creator-driven video content” and was not the role of digital platforms to pay to rescue public interest journalism.

TikTok, Google and Microsoft were approached for comment.