The Office of the United States Trade Representative (USTR) has issued a release announcing the next steps of Section 301 digital services tax (DST) investigations, including proposals for imposing additional tariffs of up to 25% ad valorem on an aggregate level of trade that would collect duties on goods from 6 countries in the range of the amount of the DST that these countries are expected to collect from U.S. companies. Countries potentially affected include Austria, India, Italy, Spain, Turkey, and the UK. Comments on proposed actions are due by 30 April 2021.
USTR Announces Next Steps of Section 301 Digital Services Taxes Investigations
Six countries remain subject to potential action while broader international tax negotiations continue
WASHINGTON – The United States Trade Representative (USTR) today announced the next steps in its Section 301 investigations of Digital Service Taxes (DSTs) adopted or under consideration by ten U.S. trading partners. In January, USTR found that the DSTs adopted by Austria, India, Italy, Spain, Turkey, and the United Kingdom were subject to action under Section 301 because they discriminated against U.S. digital companies, were inconsistent with principles of international taxation, and burdened U.S. companies. USTR is proceeding with the public notice and comment process on possible trade actions to preserve procedural options before the conclusion of the statutory one-year time period for completing the investigations.
"The United States is committed to working with its trading partners to resolve its concerns with digital services taxes, and to addressing broader issues of international taxation," said Ambassador Katherine Tai. "The United States remains committed to reaching an international consensus through the OECD process on international tax issues. However, until such a consensus is reached, we will maintain our options under the Section 301 process, including, if necessary, the imposition of tariffs."
The remaining four jurisdictions – Brazil, the Czech Republic, the European Union, and Indonesia – have not adopted or not implemented the DSTs under consideration when the investigations were initiated. Accordingly, USTR is terminating these four investigations without further proceedings. If any of these jurisdictions proceeds to adopt or implement a DST, USTR may initiate new investigations.
Federal Register notices seeking public comment on proposed trade actions in the six continuing investigations, and terminating the remaining four investigations, may be found here.
On June 2, 2020, USTR initiated investigations into DSTs adopted or under consideration in ten jurisdictions: Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey, and the United Kingdom. Following comprehensive investigations, including consultations with the countries subject to investigation and consideration of public comments, in January 2021 USTR issued reports on DSTs adopted by Austria, India, Italy, Spain, Turkey. and the United Kingdom.
The reports detail unreasonable, discriminatory, and burdensome attributes of each of these countries’ DSTs. In addition, USTR issued a status update in the investigations of the DSTs under consideration by Brazil, the Czech Republic, the European Union, and Indonesia. The update discusses the status of each jurisdiction’s consideration of a possible DST, and notes U.S. concerns that DSTs may be adopted in the future. The status updates are available here.
Termination of Section 301 Digital Services Tax investigations of Brazil, the Czech Republic, the European Union, and Indonesia, may be found here.