The Trump administration announced June 2 a new Section 301 investigation into digital services taxes adopted or under consideration by Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey, and the United Kingdom. This investigation could result in tariffs or other restrictions on imports from these trading partners if consultations do not yield a successful resolution. Comments on this investigation are due by July 15.
For more information, please contact Nicole Bivens Collinson or Kristen Smith.
DSTs are taxes on revenues generated from providing digital services to, or aimed at, users in the subject jurisdiction. According to the Office of the U.S. Trade Representative, available evidence suggests that DSTs are expected to target large, U.S.-based tech companies.
In its new investigation USTR will determine whether DSTs that have been or might be imposed by the above countries and blocs are actionable under Section 301 and, if so, what action to take. The investigation will initially focus on concerns that the DSTs may discriminate against U.S. companies, be retroactive, and diverge from norms reflected in the U.S. and international tax systems with respect to extraterritoriality, the taxation of revenue instead of income, and the apparent penalization of particular technology companies for their commercial success.
USTR is seeking public input by July 15 on these and other issues, including the extent to which the DSTs burden or restrict U.S. commerce, whether the DSTs are inconsistent with obligations under the World Trade Organization Agreement or any other international agreement, and what action (if any) should be taken.
In a separate investigation, USTR concluded in 2019 that a French DST discriminates against U.S. companies and is inconsistent with prevailing tax principles. In response, USTR proposed the imposition of additional tariffs of up to 100 percent on products from France that are drawn from a preliminary list covering products such as yogurt, butter, cheese, cosmetics, soap, handbags, and porcelain and china dinnerware. However, no such action has yet been taken, apparently because France agreed to suspend its collection of the DST until the end of 2020 to give the Organization for Economic Cooperation and Development time to conclude an international agreement on digital taxes.
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