US once more threatens to retaliate for Digital Services Tax with tariffs

Six countries have imposed special taxes on the revenues internet companies derive from their citizens and the US isn’t happy about it.

The US Trade Representative (USTR) has completed an investigation into the matter and, to everyone’s surprise, concluded government policy is beyond reproach. After having a really good look at it from all possible angles, it turned out the people who commissioned the investigation were right all along. Amazing.

As a result the USTR has imposed retaliatory tariffs on some arbitrary selection of goods from Austria, India, Italy, Spain, Turkey, and the United Kingdom, most of which are considered US allies. For now that’s just a symbolic gesture, however, as they were immediately suspended for six months to allow the trade negotiations that are already underway to run their course. Essentially the US is clumsily trying to grant itself more chips at the negotiating table.

“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,” said Ambassador Katherine Tai, of the USTR. “The United States remains committed to reaching a consensus on international tax issues through the OECD and G20 processes. 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.”

What a load of pointless double-speak. Unilaterally raising the stakes in the middle of a multilateral negotiation is clumsy, to say the least. The issue of the legitimacy of the tax remains intriguing, however. Right now it’s possible for internet giants like Amazon, Google and Facebook to muck about with where they recognise revenues for tax purposes, so it seems fair to close that loophole. One the other, the countries in question have just invented a new tax designed specifically to target US companies. Something’s got to give.