Digital service tax: US suspends proposed tariffs against India, others

NEW DELHI: The US on Wednesday suspended the imposition of retaliatory tariffs against India, the UK and four other countries that had begun levying digital service tax on companies such as Google and Facebook.
“The final determination in those investigations is to impose additional tariffs on certain goods from these countries, while suspending the tariffs for up to 180 days to provide additional time to complete the ongoing multilateral negotiations on international taxation at the OECD and in the G20 process,” the US Trade Representative Katherine Tai said in a statement.
Although the tariff would not have been significant in India’s case, it would have signalled the US resistance to back down on what was slowly emerging as a trade irritant. The government had argued that the levy was justified and did not flout global norms.

“The postponement of tariffs is similar to the DST investigation into France, where USTR indefinitely postponed tariffs after the first six-month delay to pursue negotiations at the OECD,” a government source said. The USTR did not get significantly adverse feedback on the proposed retaliatory tariff.
This is the latest move by the Biden administration to lower the tension on trade issues after his predecessor Donald Trump’s aggressive position.
“The United States is focused on finding a multilateral solution to a range of key issues related to international taxation, including our concerns with digital services taxes… Today’s actions provide time for those negotiations to continue to make progress, while maintaining the option of imposing tariffs under Section 301 if warranted in the future,” Tai said in a statement.
On June 2, 2020, USTR had initiated investigations into digital service adopted or under consideration in 10 jurisdictions — Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey, and the United Kingdom.
In January 2021, it determined that the levy in Austria, India, Italy, Spain, Turkey, and the UK discriminated against US digital companies, were inconsistent with principles of international taxation.
In March 2021, USTR announced proposed trade actions against the six countries.