US Criticizes India, Italy, Turkey Digital Taxes

The U.S. Trade Representative announced on Wednesday that digital services taxes implemented in India, Italy, and Turkey recently demonstrate bias against American businesses.

The USTR, which launched inquiries into the digital services taxes of these three countries in June of the previous year, determined that they conflict with established international tax standards, are unjustifiable, and impede or limit U.S. trade.

Detailed reports released publicly by the office reveal that the USTR examined the impact of these digital taxes on various companies, including Amazon, Google, Facebook, Airbnb, and Twitter. The USTR stated these investigations were conducted under the authority of Section 301 of the Trade Act of 1974.

India, now the largest market globally for Google and Facebook based on user numbers, first introduced digital taxes in 2016 specifically targeting international companies. Last year, the nation—the world’s second-largest internet market—broadened the scope of its tax to encompass a wider array of categories.

The USTR investigation (PDF) revealed that New Delhi is imposing taxes on “a number of digital services that are not subject to taxation under other digital services taxes adopted internationally” and estimated that the total tax burden for U.S. companies could surpass $30 million annually. The USTR also expressed concern over the fact that India does not apply comparable taxes to domestic businesses.

Despite these significant findings regarding the digital services taxes of the three nations, the USTR indicated it is not implementing any specific measures “at this time,” but will “continue to assess all available courses of action.”

U.S. technology companies have historically backed agreements negotiated by the Organisation for Economic Co-operation and Development. However, the OECD, currently finalizing the technical aspects of agreements involving over 100 countries, does not anticipate completing this work until mid-2021. In the absence of OECD agreements, several countries are proceeding with their own versions of these taxes.

Since June of last year, the USTR has initiated investigations into digital services taxes that have been enacted—or are proposed for implementation—by a number of countries, including Austria, Brazil, the Czech Republic, the European Union, Indonesia, Spain, the United Kingdom, and France, which resumed collecting digital services tax from U.S. companies late last year.

As a response, the USTR had established a deadline of January 6 for the imposition of a 25% tariff on various French imports, including cosmetics and handbags.

The USTR did not confirm whether the tariff was enacted, but stated in a release that it anticipates announcing the status or conclusion of further investigations in the coming weeks.