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US slaps tariffs on countries that hit Big Tech with digital services taxes ... then pauses them immediately
Applies pressure as negotiations on harmonized global web levies near conclusion
Countries whose digital services taxes disproportionately affect the US tech industry have been slapped with 25 per cent tariffs on up to US$2bn of their goods by the Office of the US Trade Representative (USTR).
The office announced the tariffs and a 180-day suspension of them in the same breath, with the suspension designed to provide time for negotiations to complete between G20 nations and the Organisation for Economic Co-operation and Development (OECD). These groups are right now hammering out a harmonized global digital services tax (DST) after various nations devised their own DSTs and ruffled feathers considerably.
The USTR's announcement followed a year-long investigation of DSTs. That probe concluded, according to the USTR's initiation notice [PDF] for the tariffs, that DSTs “diverge from norms reflected in the US tax system and the international tax system.”
Crucially, the USTR says DSTs penalize tech companies for succeeding.
US Trade Rep Katherine Tai tweeted:
We want to resolve the issues around digital services taxes multilaterally at the @OECD & #G20. The suspension of tariffs for 180 days after our investigation reflects @USTreasury’s good progress towards consensus and creates space for those talks to continue. https://t.co/oQg7lrHY6V— Ambassador Katherine Tai (@AmbassadorTai) June 2, 2021
The investigation deemed Austria, India, Italy, Spain, Turkey, and the United Kingdom's DSTs discriminated against American tech outfits. The US believes the six nations extract US$880m in digi-tax from American companies every year.
Investigations regarding Brazil, the Czech Republic, the EU, and Indonesia are still ongoing.
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The USTR report on India’s DST [PDF] revealed that of the 119 companies liable for the tax in India, 72 per cent are American. India charges two per cent tax on revenue generated in e-commerce services provided by foreign companies.
The OECD is hosting ongoing DST negotiations with 140 governments, and G20 ministers hope to have a worldwide solution to DSTs next month. G7 finance ministers are meeting this week in London, and are expected to support President Biden’s call for a new minimum tax to curtail clever corporate tax dodging.
If the US gets its way, a single international tax code would curb disproportionate taxes and arbitrary levies on the likes of America’s Google, Facebook, and Apple. ®