USTR Starts Multiple New Section 301 Investigations Over Digital Services Taxes

The Office of the U.S. Trade Representative will begin Section 301 investigations into digital services taxes (DSTs) that were either adopted or under consideration by multiple governments, the agency said in a June 2 news release. The investigations are focused on Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey, and the United Kingdom, it said.

Comments are due to the USTR by July 15, according to the Federal Register notice on the investigations. “Over the past two years, various jurisdictions have taken under consideration or adopted taxes on revenues that certain companies generate from providing certain digital services to, or aimed at, users in those jurisdictions,” USTR said in the notice. There's evidence that “suggests the DSTs are expected to target large, U.S.-based tech companies,” it said. For example, “the European Commission is considering a DST as part of the financing package for its proposed COVID-19 recovery plan.”

The USTR's “investigation initially will focus on the following concerns with DSTs: discrimination against U.S. companies; retroactivity; and possibly unreasonable tax policy,” it said. “With respect to tax policy, the DSTs may diverge from norms reflected in the U.S. tax system and the international tax system in several respects. These departures may include: extraterritoriality; taxing revenue not income; and a purpose of penalizing particular technology companies for their commercial success.”

Tariffs are a possible result of Section 301 investigations. The agency previously started a Section 301 investigation into France over such taxes, and tariffs were proposed but not implemented (see 2001210029).

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, and Ranking Member Ron Wyden, D-Ore., released a joint statement lauding the announcement, saying these sorts of taxes discriminate against American companies. “We support USTR’s use of the Section 301 investigation process to examine these discriminatory unilateral measures," they said.