Washington on Wednesday said that decisions by India, Italy and Turkey to tax local revenue of Internet giants such as Facebook Inc discriminates against US companies, but it would not be taking action against the countries for now.
The taxes are “inconsistent with prevailing principles of international taxation, and burden or restricts US commerce,” the office of the US Trade Representative (USTR) said in a statement.
While it would not retaliate now, the office would “continue to evaluate all available options,” it said.
The countries are among several that have instituted so-called digital services taxes, or levies on local sales of companies, including Alphabet Inc’s Google.
In June last year, the office started investigations into the moves of at least 10 countries, citing Section 301 of the US Trade Act of 1974, which allows it to retaliate for trade practices it deems unfair.
It is the same tool used to justify US tariffs on Chinese goods for alleged theft of intellectual property.
Should the US impose duties on imports from the countries, it likely would be up to the administration of US president-elect Joe Biden to implement that decision, as time is running out for the current USTR to prepare tariff lists and go through a public comment period before the duties take effect.
Plans for a digital-tax agreement brokered by the Organisation for Economic Co-operation and Development (OECD) have been delayed until at least the summer after it became clear that the initial deadline of reaching a deal last year would not be met.
The goal had been to replace individual country’s digital taxes with a global plan.
Without an OECD agreement, countries are going ahead with their own versions of the taxes, which could result in a worldwide retaliatory tax and tariff war between the US and nations that want a share of the taxes from US tech giants’ revenue.
Belgium, Norway and Latvia are among nations that could introduce digital services taxes this year, while Spain and the Czech Republic start collecting the tax this month.
The US on Wednesday was due to start charging a 25 percent levy on imports of French makeup, handbags and soap worth about US$1.3 billion annually in retaliation for the European country’s tax on the revenue of US tech companies.
The original annual value of goods to be targeted was US$2.4 billion.
France implemented its tax on digital revenue in 2019 to put pressure on the talks to advance, but Washington said that the unilateral move unfairly targeted US companies.
In January last year, French President Emmanuel Macron and US President Donald Trump agreed a truce in their dispute to give time for the international negotiations to reach a global deal, but the talks stumbled in October and France resumed collecting the tax in the middle of last month.
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