The Office of the U.S. Trade Representative (USTR) announced that it is launching Section 301 investigations into Digital Services Taxes (DSTs) from nine different countries and the European Union, namely India, Indonesia, the United Kingdom, Czech Republic, Spain, Austria, Turkey, Italy, and Brazil. Some DST’s have already been imposed while others are under consideration.
These investigations will determine whether those taxes are discriminatory and unfairly target American companies.
On December 2, 2019, USTR completed a similar investigation into the French Digital Tax and concluded that
France’s Digital Services Tax discriminates against U.S. companies, is inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected U.S. companies. Specifically, USTR’s investigation found that the French DST discriminates against U.S. digital companies, such as Google, Apple, Facebook, and Amazon.
As a result, USTR proposed tariffs of up to 100 percent on $2.4 billion of French products. Following the tariff threat from the U.S., and bilateral talks between U.S. President Trump and French President Macron, France agreed to delay the collection of the tax until 2021.
The countries’ Digital Taxes that are now under investigation are very similar in their scope and form, as they are designed to tax revenue rather than income and have the purpose of penalizing certain technology companies for their commercial and innovative success.
After more and more countries have decided to unilaterally impose discriminatory digital taxes targeting American companies it is time to act and put pressure on those countries to stops their efforts. Digital Taxes pose an unprecedented danger to the international system of taxation, innovation, and the digital economy.