Digital tax controversy: US imposes punitive tariffs

The US is ratcheting up pressure ahead of G7 deliberations on taxing big tech companies. President Joe Biden’s government has announced higher tariffs on export goods from several countries, but has suspended those duties for the time being.

The US government is increasing pressure on Great Britain and five other countries in the dispute over digital taxes for US technology companies such as Alphabet, Amazon and Facebook. US Trade Representative Catherine Taye announced in Washington retaliatory tariffs of 25 percent on goods totaling more than $2 billion. However, it must be suspended initially for six months in order to find an international negotiated solution during this period. The background to this is the search for a regulation for international taxation of large digital companies.

This move is also directed against India, Austria, Italy, Spain and Turkey. Countries must now fear rising barriers to importing some of their export goods. The tariffs are supposed to be retaliation against new taxes on international corporate digital services that countries have introduced on their own.

Measures “Based for Further Negotiations”

“The United States continues to seek consensus on international tax issues through the OECD and G20 processes,” Tay said. These measures will serve as the basis for further negotiations. The trade commissioner said Washington is keeping the option open to impose tariffs if this is warranted in the future.

In the case of Great Britain, for example, it concerns clothing, jewelry and cosmetics. Based on import data for the 2019 calendar year, the US government puts the range of goods affected here at about $887 million.

Italy is threatened with higher tariffs on perfume, handbags and ties, with the volume here amounting to about $386 million. Spain will have to deal with much higher export barriers for goods worth $324m, with Turkey $310m, India and Austria 118m and 65m respectively.

Tariffs of 25 percent on $1.3 billion in French goods were already suspended in January. These were also collected in the context of a tax dispute.

The European Union wants to calculate the digital tax on sales

In March, the Office of Trade Representatives ended investigations into possible discrimination against US companies by the European Union, Brazil, Indonesia and the Czech Republic, so that there was no longer any risk of tariff increases.

The background to the controversy is that large US digital companies such as Facebook, Google and Amazon hardly pay taxes in Europe. Therefore, the European Union calls for a digital sales tax at the level of the Organization for Economic Co-operation and Development. The Group of 20 major and emerging industrial countries tasked the Organization for Economic Cooperation and Development in 2018 to agree on an international digital tax by the end of 2020.

But under US President Donald Trump, there has been little progress on this internationally. National plans – such as France’s digital tax – have also created tensions across the Atlantic. With the inauguration of Joe Biden, Washington recently began a vigorous campaign for minimal corporate taxes around the world.