Section 301 Tariffs Temporarily Suspended for Six Countries Over Digital Taxes

Digital Service Taxes

Trade Update • JUNE 03, 2021

The Office of the U.S. Trade Representative today announced the conclusion of the Section 301 investigations of Digital Service Taxes recently adopted by Austria, India, Italy, Spain, Turkey, and the United Kingdom.

Exactly one year after being launched by the Trump administration, the USTR’s final determination is that the digital taxes unfairly discriminate against U.S. companies and, therefore, imports of certain goods from the six countries in question should be subject to a punitive tariff of 25%. The tariff aims to counterbalance the amount of taxes the USTR estimates would be collected from U.S. providers of digital services.

However, as the previous administration did last January with threatened tariffs against France over its DST, the USTR has decided to immediately suspend imposition of this additional tariff for a period of no more than 180 days. During this time, USTR Katherine Tai said the administration’s efforts will be focused on finding “a multilateral solution to a range of key issues related to international taxation, including our concerns with digital services taxes.”

The six-month suspension period while talks at the Organization for Economic Cooperation and Development (OECD) and via the G20 working process are ongoing will, said Tai, “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.”

Lists of the specific goods targeted by the USTR, estimated to be valued at roughly $2 billion, that would be hit with the tariff if negotiations fail to reach a solution that prohibits countries from imposing unilateral DSTs, can be found here.

A spokesperson for the U.K. government told Reuters that its DST is “temporary and we’re working positively with international partners to find a global solution to this problem. We will remove the DST when that is implemented.”

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