From the United States to India and 5 others: you tax Big Tech, we price you
NEW YORK – From Indian basmati rice to Italian handbags to Turkish rugs, the United States will impose tariffs of 25% on up to $ 2 billion in goods from six countries in retaliation for their taxation of U.S. digital services, the U.S. trade representative said on Wednesday. .
But he immediately gave 180 days to see if the issue can be resolved through ongoing negotiations.
The announcement came as the Office of the U.S. Trade Representative concluded its year-long investigation into digital services taxes adopted by Austria, India, Italy, Spain, Turkey and the United States. United Kingdom, which he considered discriminatory against American technology companies.
“The United States remains committed to reaching consensus on international tax issues through the OECD and G-20 processes,” USTR Katherine Tai said in a statement. “Today’s actions allow time for these negotiations to continue moving forward while retaining the ability to impose Section 301 tariffs if warranted in the future.”
Similar US reviews of digital tax practices in Brazil, the Czech Republic, the EU and Indonesia are underway.
The move comes as Tai seeks to protect U.S. businesses from digital service taxes in other countries, which Washington says are targeting U.S. businesses like Facebook and Amazon overwhelmingly. Instead, Washington called for a single international code that unifies tax rates and prevents arbitrary deductions.
The dispute between the United States – home to many of the world’s largest tech players – and other economies highlights the growing gap between governments over how to view digital commerce due to lagging criteria and international rules in this growing space.
The Organization for Economic Co-operation and Development is leading negotiations involving around 140 governments to set standards on taxes on digital services. The Group of Twenty finance ministers aim to reach agreement on a consensual solution by their meeting next month, as part of this global effort.
In response to the growing number of governments introducing a national digital tax, President Joe Biden’s administration sent its own proposals in April to countries involved in OECD discussions on a global tax overhaul.
This includes a system to tax the world’s 100 largest companies based on sales in each country, regardless of their physical presence. Such a system would distract from the conversation about the global tax review for tech companies, even if companies like Google, Facebook, and Amazon would still hit such a threshold. Biden also advocated for a global minimum corporate tax.
The challenges of digitizing the global economy have also been a thorny issue for the World Trade Organization. New WTO Director General Ngozi Okonjo-Iweala spoke of the urgent need to update the organization’s rules to reflect the prevalence of e-commerce and the digital economy.
The United States estimates that the six countries it sanctioned on Wednesday collectively levy $ 880 million in digital services taxes from U.S. businesses each year.
India, for example, levies a 2% tax on income generated from e-commerce services offered in the country, but only on foreign companies. U.S. companies pay about $ 55 million a year in taxes on digital services to the nation’s government, according to the USTR.
Indian products targeted by Washington’s retaliatory measures this time include agricultural products and jewelry.
In a public comment submitted to the USTR, the Aluminum Association of India urged the Biden administration to reach agreement on its global minimum tax proposal or sign a bilateral trade agreement between India and the United States. to meet the challenge of the digital tax.