US plans tariffs against six nations as digital tax talks heat up

By Doug Connolly, MNE Tax

The US Trade Representative on June 2 announced and then immediately delayed implementation of new tariffs on goods from six countries – Austria, India, Italy, Spain, Turkey, and the UK – in response to the countries’ adoption of digital taxes.

Implementation of the tariffs is suspended for “up to” 180 days to allow time for a deal addressing digital taxation to be reached in the ongoing multilateral OECD/G20 talks, the US Trade Representative said.

The US Trade Representative initially recommended the tariffs against the countries in March following its findings that the countries’ digital services taxes discriminate against US companies. The US has criticized such digital taxes for targeting large, US-based digital companies, such as Google and Facebook.

The new tariffs would impose additional ad valorem duties of 25% on specified products from each country. The tariffs are designed to collect duties on goods from the countries in an amount that would offset the amounts that the countries are expected to collect from US companies under their digital services taxes.

The delayed implementation for up to 180 days – i.e., up to November 29 – is intended to allow time for international negotiations to reach a “satisfactory resolution” to the issue.

Progress on OECD/G20 discussions on new international tax rules is anticipated in G20 meetings in July and October. If successful, such negotiations are expected to address unilateral tax measures, such as the digital services taxes in question, which the US would like to stop.

Meanwhile, other countries, including Canada, have also threatened to impose digital services taxes over US objections if multilateral talks do not adequately address their concerns. Canada objects to the current international tax system in which companies can have a significant digital presence in their country but limited physical presence and remain untaxed.

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Doug Connolly

Editor-in-Chief at MNE Tax

Doug Connolly is Editor-in-Chief of MNE Tax. He has more than 10 years of experience covering tax legal developments, previously working with both a Big Four firm and a leading legal publisher. He holds a law degree from American University Washington College of Law.

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