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US confronts 'digital dagger' from overseas aimed at top tech companies

Gopal Ratnam, CQ-Roll Call on

Published in Science & Technology News

Late last month, the Biden administration signaled that it was preparing to slap a 25 percent tariff on goods imported from six countries, including the United Kingdom, in retaliation for a digital service tax those countries were set to collect on search engines, social media companies and online retailers that were mostly American.

The Office of the U.S. Trade Representative said a six-month investigation had found that the digital tax levied by the U.K. and other countries was “unreasonable, or discriminatory and burdens or restricts U.S. commerce.”

In addition to the U.K., the countries that have adopted such taxes are Austria, India, Italy, Spain and Turkey. Their actions were discriminatory, the USTR found, after conducting so-called Section 301 investigations. Others, including Brazil, the Czech Republic, the European Union and Indonesia, are considering similar proposals but have yet to adopt them.

During the Trump administration, the USTR also investigated France’s digital service tax and determined that it was discriminatory and recommended retaliatory tariffs, but it suspended implementation pending an ongoing negotiation under the aegis of the Organization of Economic Cooperation and Development and the G-20 group of countries.

The Internet Association, a trade group that represents top online companies, said in a statement that it backed the USTR’s move to propose retaliatory tariffs on goods and services imported from Austria, India, Italy, Spain, Turkey and the U.K.

The USTR position is “an important affirmation in pushing back on these discriminatory trade barriers as the U.S. continues to work to find a viable solution at the OECD,” the trade group said.

 

Top U.S. lawmakers have said that the digital service tax adopted by other countries unfairly targets top American tech companies, including Facebook, Google and Amazon, that provide services to consumers around the world.

“We are seeing many countries around the world in effect deploying what I call a digital dagger,” Senate Finance Chairman Ron Wyden, D-Ore., said at the Feb. 25 hearing on the nomination of Katherine Tai to become the U.S. trade representative. Referring to digital service taxes being adopted by other countries, Wyden said it was aimed “right at the heart of American companies that pay high-skill, high-wage jobs, and it really just seems an effort to hold our companies back to advantage others.”

Idaho Sen. Michael D. Crapo, the top Republican on the Finance Committee, said he had the same concerns as Wyden on the digital tax.

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