The United States on Wednesday announced ‘suspended’ additional tariffs on certain goods from India and five other countries it has deemed at the conclusion of a year-long probe to have adopted digital services taxes that are discriminatory against its businesses.
The new tariffs will come into effect only after 180 days, giving time for negotiations under way at the G-20 group of countries and the Organization for Economic Cooperation and Development (OECD), the office of the top US trade representative (USTR) said in an announcement.
“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 (DSTs),” said USTR 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.”
The United States launched a comprehensive Section investigation into digital services taxes adopted by nine countries and one jurisdiction in June 2020: India, Austria, Brazil, the Czech Republic, Indonesia, Italy, Spain, Turkey, the UK, and the European Union,
In January 2021, the USTR concluded that the DSTs in India, Austria, Turkey, UK, Italy and Spain, “discriminated against US digital companies, were inconsistent with principles of international taxation, and burdened US companies”.
In March, the USTR announced trade actions against these six entities and kicked of a public-notice and comment period, with hearings.
In public notice issued in April inviting comments and announcing a hearing into the investigation related to India, the USTR had called into question a 2% tax adopted by India on revenue generated from a broad range of digital services including digital platform services, digital content sales, digital sales of a company’s own goods, data-related services, software-as-a-service, and others. The DSTs, it had noted, only applied to “non-resident” companies.
And the trade representative had said in the same announcement that the retaliatory trade action it is proposing is an additional tariff of up to 25%t “ad valorem on an aggregate level of trade that would collect duties on goods of India in the range of the amount of DSTs that India is expected to collect from US companies”, which, it added, would be up to approximately $55 million per year.