The US trade representative is preparing tariffs against six countries over taxes on digital services
A special treatment of France would be enacted in retaliation for the GAFA tax

Elected last week as the United States Trade Representative (USTR) for the Biden administration, Katherine Tai, a Democrat, quickly renewed the threat against countries that recently voted for laws to further tax the domestic activities of American companies. In the crosshairs are the United Kingdom, India, Italy, Spain, Germany and Turkey, which passed laws deemed discriminatory and contrary to international tax norms by the United States. The French case should be handled differently and will simultaneously take into account imports of technologies and other products from other sectors.

Uncertainty had prevailed since the failure of negotiations at the OECD, but the shape of technology exchanges between the countries concerned is beginning to take form. About two weeks after taking the helm at the USTR, Democrat Katherine Tai presented an analysis of the situation on Friday 26 March. The analysis shows that the country will continue on the path of counter-attack like the previous administration. In a statement, Tai said she maintains the threat of US duties on products from Austria, the United Kingdom, India, Italy, Spain and Turkey.

She is doing so in retaliation for their digital services taxes. Tai announced that her office would take steps to impose potential tariffs, including issuing public notices and soliciting public comment as part of the investigations originally launched by the Trump administration into taxes largely targeting US internet companies and e-commerce platforms. These taxes target in-country revenues of digital service platforms, such as Facebook, Google and Amazon.

The USTR announced this decision despite renewed commitments by Democratic President Joe Biden to seek a global agreement on digital services taxes through the OECD. Outlining the next steps in the Section 301 investigations into digital services taxes (DSTs) adopted or under consideration by ten of the United States' trading partners, the Democrat said these laws are unwelcome because they run counter to the fundamental principles of international trade.

“In January, the USTR concluded that the digital services taxes adopted by Austria, India, Italy, Spain, Turkey and the United Kingdom were subject to action under Section 301 because they were discriminatory against American digital companies, incompatible with international tax principles and imposed a burden on American companies. The United States is committed to working with its trading partners to resolve their concerns regarding DSTs, and to address broader issues of international taxation,” she said.

"The United States remains committed to achieving an international consensus through the OECD process on international tax matters. However, until such a consensus is reached, we will preserve our options under the Section 301 process, including, if necessary, the imposition of tariffs." Tai also said that the USTR was closing investigations into Brazil, the Czech Republic, the European Union and Indonesia because those jurisdictions had not adopted or implemented the DSTs that were previously under consideration.

Furthermore, if they adopt a DST, the USTR indicated it could open a new tariff investigation. Tai said during her confirmation hearing in February that tariffs were a “legitimate tool” of US trade policy. The Internet Association, which represents the major US internet platforms, welcomed the decision to maintain the tariff threat against the six countries, calling its industry a “major American export” that supports millions of jobs. The group also regards the laws passed by the aforementioned countries as discriminatory trade barriers.

"The decision announced today by the USTR is an important affirmation in the fight against these discriminatory trade barriers, while the United States continues to work to find a viable solution at the OECD," the trade group said in a statement. In the case of France, which adopted a 3% turnover tax on large American companies in 2019, Tai did not provide further details in her statement. However, sources indicate that Tai is reserving special treatment for France.

According to them, the United States is maintaining a more advanced tariff threat against $1.3 billion of imports of champagne, cosmetics, handbags and other French products, in retaliation for the French digital tax. It should be noted that France had relatively stopped levies under the GAFA tax before the OECD meeting. But following the failure of negotiations, the government announced it would resume levies from December 2020.

Source: USTR Press Release