By Doug Connolly, MNE Tax
The US Trade Representative (USTR) on March 26 recommended trade actions against Austria, India, Italy, Spain, Turkey, and the UK following its findings that digital services taxes adopted by these countries discriminate against US companies.
In each case, the USTR is proposing to impose additional tariffs of up to 25% ad valorem on a quantity of trade from each country. The aim is 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 DSTs. Comments on the USTR recommendations are requested by April 30.
The USTR also announced that it was terminating investigations into the proposed digital services taxes of four additional jurisdictions – Brazil, the Czech Republic, the EU, and Indonesia – which have not yet adopted or implemented the digital services taxes that they were considering when those investigations were launched.
The USTR launched the investigations into the ten jurisdictions in June 2020. In reports issued in January 2021, the USTR determined that the digital services taxes adopted by Austria, India, Italy, Spain, Turkey, and the UK discriminate against US companies within the meaning of Section 301 of the US Trade Act of 1974.
The investigations into these ten jurisdictions followed earlier USTR actions in response to France’s digital services tax. The US has since suspended retaliatory measures in response to France’s digital services tax scheduled to take effect in January 2021, pending its consideration of a more unified response following the launch of the investigations into the other countries.
Because the digital services taxes adopted by these countries generally apply to only the largest companies, the US has taken the position that they discriminate against large, US-based digital companies like Amazon and Facebook in favor of smaller domestic companies.
The OECD and G20 continue to work on gaining consensus by mid-2021 on an international agreement for revising rules on taxing MNEs, including subjecting digital companies to greater taxation in countries where their customers are located.
Doug Connolly
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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