U.S. to Levy Tariffs Over Digital-Service Tax, but Suspend Implementation--3rd Update
By Yuka Hayashi and Paul Hannon
WASHINGTON -- The U.S. said Wednesday it will impose tariffs on
the U.K. and five other countries in response to their taxes on
U.S. technology companies, but will suspend the levies for six
months as it seeks to negotiate an international resolution.
U.S. trade representative Katherine Tai said investigations
determined that tariffs were justified because of digital-services
taxes imposed on U.S. companies by the U.K., Austria, India, Italy,
Spain and Turkey.
She said the tariffs would be suspended while the U.S. focuses
on finding "a multilateral solution to a range of key issues
related to international taxation."
She said the U.S. is looking to resolve the issue through the
Group of 20 economic powers and other international groups.
The digital-services taxes affect companies such as Alphabet
Inc.'s Google and Facebook Inc., and have been a flashpoint in the
fight over which countries should have taxing rights over the
world's largest companies.
A growing number of countries, many in Europe, implemented such
taxes in recent years after expressing frustration at the slow pace
of international talks over how to change the global tax system.
Those countries have demanded that big tech firms pay more tax in
the countries where their clients are located, while the U.S. has
resisted changes that would focus only on American tech
In response to the one-off digital taxes, the U.S. had
threatened tariffs, beginning with France, raising the risk of a
trade war over the issue. But under the Biden administration, there
has been progress in multinational talks, and the U.S. has said it
would suspend application of its tariffs. The countries that have
implemented taxes have said they plan to withdraw them once there
is an international deal.
Tech companies have said they support international changes to
tax laws, rather than being subject to a patchwork of national
The six affected countries didn't immediately respond to
requests for comment on the suspended tariffs.
The proposed U.S. tariffs of 25% would target imports worth
nearly $2 billion from the six countries, including imports worth
over $800 million from the U.K. and more than $300 million each
from Italy and Spain.
Following investigations initiated against 10 countries in June
2020, the USTR under the Trump administration determined in January
that the tax policies of the six countries discriminated against
U.S. digital companies and that they were "inconsistent" with the
principles of international taxation.
A USTR official said the latest decision was driven by the
deadline imposed by the terms of the original investigations and
that it was "not an escalatory action."
The negotiations to find a global solution to technology taxes
at the Organization for Economic Cooperation and Development and
G-20 are moving quickly, the USTR official said during a media
briefing, adding, "We are hoping to see these issues resolved
within the next 180 days."
The hope that an agreement can be secured this year is widely
shared. Speaking Tuesday as he started a five-year term as
secretary-general of the OECD, Mathias Cormann said he was quietly
optimistic, in part because of the Biden administration's fresh
commitment to the talks, which had stalled under the previous
"The approach taken by the Biden administration has been a game
changer, " Mr. Cormann said. "I very much welcome, and I know that
overwhelmingly members welcome, the very positive and constructive
engagement of the United States designed to facilitate a consensus
in the not too distant future."
The negotiations will continue in London when treasury chiefs
from the Group of Seven industrialized nations, including Janet
Yellen, meet Friday and Saturday. If they agree to adopt a common
stance on the tax overhaul, it will increase the likelihood of an
accord at a meeting of treasury chiefs from the Group of 20 leading
economies in Venice on July 9 and 10.
According to the Internet Association, a group that represents
over 40 global internet companies such as Amazon.com Inc., Facebook
and Google, U.S. digital exports currently total $517 billion
annually, accounting for more than half of the U.S.'s total service
Jordan Haas, the association's director of trade policy, said
during a May 3 hearing that an increasing number of foreign
governments are targeting U.S. tech companies. "The scope of these
digital-services taxes are specifically designed to go after U.S.
digital companies while protecting foreign competitors from the
scope of the taxes," he said.
--Sam Schechner contributed to this article.
Write to Yuka Hayashi at firstname.lastname@example.org and Paul Hannon at
(END) Dow Jones Newswires
June 02, 2021 13:03 ET (17:03 GMT)
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