America launches trade probe into digital taxes, preparing the ground for new tariffs

US Trade Dept

The United States is investigating digital services taxes being adopted or considered by Britain, Italy, Brazil and other countries, the US Trade Representative’s office said on Tuesday, a move that could lead to new punitive tariffs and heighten trade tensions.

KEY POINTS

  • The US is investigating digital services taxes being adopted or considered by the UK, Brazil and many EU nation states
  • President Trump is concerned that trading partners are adopting tax schemes designed to unfairly target our companies
  • Negotiations through the Organisation for Economic Co-operation and Development to set a global standard for digital taxation have proved fruitless

Such taxes are seen by several countries as a way to raise revenue from the local operations of companies including Google and Facebook.

“President (Donald) Trump is concerned that many of our trading partners are adopting tax schemes designed to unfairly target our companies,” US Trade Representative Robert Lighthizer said in a statement.

“We are prepared to take all appropriate action to defend our businesses and workers against any such discrimination.”

The European Union for one has been viewed as using antitrust fines and new forms of taxation against highly profitable dot-com businesses as a revenue generator that helps to balance its accounts.

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The announcement came after the US Commerce Department said it would investigate whether imports of the metal vanadium violate national security, a sign that the Trump administration is actively pursuing new trade barriers despite the coronavirus pandemic.

Trump based his nearly two-year trade war with China on a probe into Beijing’s intellectual property and technology transfer practices under Section 301 of the US Trade Act of 1974, which authorises action, including tariffs, to end foreign government practices that curb US commerce.

Broad negotiations through the Organisation for Economic Co-operation and Development to set a global standard for digital taxes have proven elusive, and the coronavirus pandemic has slowed them down.

In a Federal Register notice, the USTR said the probe would cover 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. The trade agency said it has requested consultations with these governments.

Spain’s plans to tax tech companies’ revenues do not discriminate against any country, a government source told the news agency Reuters.

The Internet Association industry trade group said the probe was needed since a growing number of countries had proposed or enacted digital taxes despite the OECD negotiations.

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“The US must continue sending a strong message to trading partners that targeted discriminatory taxes against US firms are not an appropriate solution,” said the group’s trade policy director Jordan Haas.

The USTR said the probe would look at whether the taxes discriminate against American companies, are unfairly retroactive and “possibly unreasonable” in that they diverge from international norms.

The team at Platform Executive hope you have enjoyed the ‘America launches trade probe into digital taxes, preparing the ground for new tariffs‘ article. Automatic translation from English to a growing list of languages via Google AI Cloud Translation. Initial reporting via our official content partners at Thomson Reuters. Reporting by David Lawder. Additional reporting by Catarina Demony and Andrea Shalal. Editing by Chizu Nomiyama, Steve Orlofsky and Richard Chang.

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