US Sets and Suspends 25 Percent Tariffs on Six Countries Over Digital Taxes

The United States on Wednesday announced 25 percent tariffs on over $2 billion (roughly Rs. 14,625.51 crores) worth of imports from six countries over their digital services taxes, but immediately suspended the duties to allow time for international tax negotiations to continue.

The US Trade Representative's (USTR) office said it had approved the threatened tariffs on goods from Britain, Italy, Spain, Turkey, India, and Austria after a "Section 301" investigation concluded that their digital taxes discriminated against US companies.

USTR published lists of imports from the six countries that would face tariffs if international tax negotiations fail to reach a solution that prohibits countries from imposing unilateral digital services taxes.

USTR said it would impose 25 percent tariffs on about $887 million (roughly Rs. 6,480 crores) worth of goods from Britain, including clothing, overcoats, footwear, and cosmetics, and on about $386 million (roughly Rs. 2,820 crores) worth of goods from Italy, including clothing, handbags and optical lenses. USTR said it would impose tariffs on goods worth $323 million (roughly Rs. 2,360 crores) from Spain, $310 million (roughly Rs. 2,260 crores) from Turkey, $118 million (roughly Rs. 860 crores) from India and $65 million (roughly Rs. 475 crores) from Austria.

The potential tariffs, based on 2019 import data, aim to equal the amount of digital taxes that would be collected from US firms, a USTR official said.

The move underscores the US threat of retaliation as finance leaders from G7 countries prepare to meet in London on Friday and Saturday to discuss the state of tax negotiations, including taxation of large technology companies and a US proposal for a global minimum corporate tax.

US tariffs threatened against France over its digital tax were suspended in January to allow time for negotiations.

US Trade Representative Katherine Tai said she was focused on "finding a multilateral solution" to digital taxes and other international tax issues and was committed to reaching a consensus through the OECD and G20 negotiations.

"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," Tai added.

Tai faced a Wednesday deadline to announce the tariff action, or the statutory authority under the Section 301 probes would have lapsed, one year after they were opened by the Trump administration.

A British government spokesperson said the UK tax was aimed at ensuring tech firms pay their fair share of tax and was temporary.

"Our digital services tax is reasonable, proportionate and non-discriminatory," the spokesperson said. "It's also temporary and we're working positively with international partners to find a global solution to this problem. We will remove the DST when that is implemented."

© Thomson Reuters 2021