The US Trade Representative announced the start of an investigation into digital service taxes being imposed in a number of countries. The investigation could lead to the trade authority taking action against other countries if it finds the taxes are unfair or negatively affect US companies trading abroad.
The USTR opened a consultation process to collect input from the public as part of the investigation. The Computer & Communications Industry Association welcomed the move, saying the digital taxes "disproportionately affect US services, upend long-standing international taxation norms, and undermine ongoing discussions toward a global solution to modernize taxation for the digital era".
Spain, Indonesia, the UK, India, Austria, France and Italy are among the countries that have passed digital service taxes or similar levies and are preparing to start collection. The taxes target online platforms such as Google and Facebook, which generate significant revenue from online advertising but often pay little corporate income tax due to their limited physical presence in the country.
The companies have said they support international efforts at the OECD to reform taxes on multinationals and called on national governments to await the outcome of the negotiations. However, the US has been reluctant to make the OECD changes mandatory, instead supporting a voluntary agreement. This has prompted some countries to take action on their own.
France earlier agreed to suspend collection of its tax in order to avoid sanctions by the US trade representative following a similar investigation and give more time to reach an agreement at the OECD. However, the French finance minister said last month it would start collecting the levy this year, which was especially important given the sharp fall in tax income since the coronavirus outbreak.
