US threatens tariffs over UK digital services tax
The United States Trade Representative (USTR) has announced a series of hearings in the next steps in its Section 301 investigations of digital service taxes (DSTs) adopted or under consideration by 10 US trading partners. It is also threatening to levy tariffs of up to 25% on certain British imports in retaliation.
In January, USTR found that the DSTs adopted by Austria, India, Italy, Spain, Turkey, and the UK were subject to action under Section 301 because they discriminated against US digital companies, were inconsistent with principles of international taxation, and burdened US companies.
USTR is proceeding with the public notice and comment process on possible trade actions to preserve procedural options before the conclusion of the statutory one-year time period for completing the investigations.
The US is critical of the UK’s digital services tax that applies a 2% tax on the revenues of certain search engines, social media platforms and online marketplaces. The UK’s DST applies only to companies with digital services revenues exceeding £500m and UK digital services revenues exceeding £25m.
If agreement is not reached, USTR proposes to impose additional tariffs of up to 25% on an aggregate level of trade that would collect duties on goods of the UK in the range of the amount of the DST that the UK is expected to collect from US companies. Initial estimates indicate that the value of the DST payable by US-based company groups to the UK will be up to approximately $325m (£235m) per year.
The deadline for written comments on the proposals is April 30th, 2021.