US give India and 5 other nations 6 months for additional digital tariffs


The United States Trade Representative (USTR) on Wednesday, June 3, announced punitive tariffs on India and five other countries over their digital services taxes (DST), but immediately suspended the levies to allow time for international tax negotiations to continue.

USTR has offered six months to provide additional time to complete the ongoing multilateral negotiations on international taxation at the OECD and G20.

In March last year, the USTR has proposed retaliatory trade actions against India and certain other countries that have imposed or are considering equalization levy/digital services tax on e-commerce companies.

USTR has proposed to impose additional tariffs of up to 25% ad valorem on an aggregate level of trade that would collect duties on Indian goods in the range of the amount of DST that India is expected to collect from US companies.

Katherine Tai, a representative in a statement, announced the conclusion of the one-year Section 301 investigations of Digital Service Taxes (DSTs) adopted by Austria, India, Italy, Spain, Turkey and the UK.

She said in the statement, “The final determination in those investigations is to impose additional tariffs on certain goods from these countries, while suspending the tariffs for up to 180 days to provide additional time to complete the ongoing multilateral negotiations on international taxation at the OECD and in the G20 process.”

“The US remains committed to reaching a consensus on international tax issues through the OECD (Organization for Economic Cooperation and Development) and G20 processes,” Tai said.

“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,” said the USTR.

In July 2019, the US launched a Section 301 investigation into France’s planned tax on digital services, accusing the French government of “unfairly targeting the tax at certain US-based technology companies”.

French Finance Minister Bruno Le Maire, however, argued that the tax is necessary to make big internet companies pay their fair share of taxes.

In June 2020, the US initiated Section 301 investigations into DSTs considered by 10 American trading partners, including the European Union, Brazil and India.

In January this year, the USTR decided to suspend proposed additional 25 percent tariffs on about $1.3 billion worth of French products amid DSTs dispute, “in light of the ongoing investigation of similar DSTs adopted or under consideration in ten other jurisdictions”.

Also in January, USTR determined that the DSTs adopted by Austria, Britain, India, Italy, Spain, Turkey discriminated against US digital companies, were inconsistent with principles of international taxation, and burdened the firms.

In March, USTR announced proposed trade actions in these six investigations and undertook a public notice and comment process.

It also terminated the remaining four investigations (of Brazil, the Czech Republic, the European Union, and Indonesia) “because those jurisdictions had not implemented the DSTs under consideration”.