Countries whose digital services tax disproportionately affect the US tech industry have been imposed a 25 percent tariff on goods worth up to US$2 billion by the Office of the US Trade Representative (USTR).
The office announced the tariffs and in the same breath announced a 180-day suspension, with the suspension designed to provide time for negotiations between the G20 countries and the Organization for Economic Co-operation and Development (OECD) to be completed. These groups are now working on a harmonized global Digital Services Tax (DST), spreading wings everywhere, after various nations have prepared their own DSTs.
USTR’s Announcement After a year long investigation of DST. According to the USTR, the investigation was completed initiation notice [PDF] As for tariffs, that DST “detracts from the norms reflected in the US tax system and the international tax system.”
Importantly, the USTR says that DSTs penalize tech companies for being successful.
US Trade Representative Catherine Tai tweeted:
We want to resolve the issues of digital service taxes multilaterally @OECD And #G20. Indicates suspension of tariff for 180 days after our investigation @U.S. TreasuryThere has been good progress towards consensus and there is room for those talks to continue. https://t.co/oQg7lrHY6V
— Ambassador Catherine Tai (@AmbassadorTai) 2 June 2021
The investigation considered DST from Austria, India, Italy, Spain, Turkey and the United Kingdom as discrimination against American technical organizations. The US believes that six countries withdraw US$880m in digi-tax from US companies every year.
Investigations are still ongoing with respect to Brazil, the Czech Republic, the European Union and Indonesia.
USTR report India’s DST [PDF] It was found that out of 119 companies liable to tax in India, 72 percent are American. India levies two percent tax on revenue generated in e-commerce services provided by foreign companies.
The OECD is hosting ongoing DST talks with 140 governments, and G20 ministers expect a DST resolution next month. G7 finance ministers are meeting in London this week, and are expected to support President Biden’s call for a new minimum tax to dodge the shrewd corporate tax.
If the US gets its way, a single international tax code would curb disproportionate taxes and arbitrary charges on America’s likes of Google, Facebook and Apple. ®
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