US announces suspended tariffs on countries charging Digital Services Taxes

The USTR announces and immediately suspends tariffs on six trading partners that impose a 'digital services tax', or DST, on tech giants.
Written by Liam Tung, Contributing Writer

The United States Trade Representative (USTR) has wrapped up a year-long investigation into DSTs (Digital Services Taxes) that affect US tech firms. It will impose tariffs on six countries, but will hold off implementing them for 180 days to allow negotiations to continue.

Among the countries within the USTR investigation, and now subject to the suspended tariffs, are Austria, India, Italy, Spain, Turkey, and the UK. 

G20 nations floated the idea of a digital services tax in 2019 under a plan to levy more taxes from tech giants, most of which are headquartered in the US. 

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On April 1 2020, the UK introduced a 2% tax on the revenues of search engines, social media services and online marketplaces if they make money from UK users.  

France also implemented the tax and was threatened with retribution from former US president Donald Trump, but was not named in the USTR's latest announcement regarding suspended US trade tariffs. France was also under investigation over its digital services tax.

The 180-day suspension will allow the US to complete multilateral negotiations on international taxation at the OECD and in the G20 process, the USTR said.  

The US launched its investigation into the DST schemes on June 2, 2020 in Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey, and the UK.  

"The United States is focused on finding a multilateral solution to a range of key issues related to international taxation, including our concerns with digital services taxes," said USTR ambassador Katherine Tai. 

"The United States remains committed to reaching a consensus on international tax issues through the OECD and G20 processes. Today's actions provide time for those negotiations to continue to make progress while maintaining the option of imposing tariffs under Section 301 if warranted in the future."

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In January, the USTR announced that it had determined the UK's DST "is unreasonable or discriminatory and burdens or restricts U.S. commerce and thus is actionable under Section 301."

The UK's digital services tax applies to companies with digital services revenues exceeding £500 million and UK digital services revenues exceeding £25 million.

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