US forges ahead on US$1b tariff plan over digital taxes
WASHINGTON (BLOOMBERG) – The United States is pressing ahead with plans to hit six nations that tax Internet-based companies with retaliatory tariffs that could total almost US$1 billion (S$1.34 billion) annually.
Goods entering the US – ranging from Austrian grand pianos and British merry-go-rounds to Turkish kilim rugs and Italian anchovies – could face tariffs of as much as 25 per cent annually, documents published by the US Trade Representative (USTR) show.
The duties are in response to countries that are imposing taxes on technology firms that operate internationally such as Amazon.com and Facebook.
In each of the six cases, the USTR proposes to impose tariffs that would roughly total the amount of tax revenue each country is expected to get from the US companies. The cumulative annual value of the duties comes to US$880 million, according to Bloomberg News calculations.
There have been efforts to replace each individual country’s digital taxes with one global standard – to be brokered by the Organisation for Economic Cooperation and Development (OECD) – but a deal has yet to be reached.
The US says it is committed to the OECD process, but will maintain its options, including tariffs, in the meantime, USTR Katherine Tai said in a statement on March 26.
The Internet Association – whose members include Amazon, Facebook and Alphabet Inc’s Google – welcomed the USTR’s move.
The USTR’s action “is an important affirmation in pushing back on these discriminatory trade barriers as the US continues to work to find a viable solution at the OECD”, the group said in a statement.
The USTR has invited public comment on its plans to go ahead with the tariffs, and will hold public hearings at the start of next month.
Below is a round-up of the tax laws in each country, which goods may be affected, and the date of the virtual USTR hearing.
Britain
Britain applies a 2 per cent tax on the revenues of certain search engines, social media platforms and online marketplaces.
The tax affects companies with digital-services revenue exceeding £500 million (S$932 million) and UK-specific digital services revenues exceeding £25 million.
The USTR estimates the value of the digital services tax (DST) payable by US-based company groups to Britain be about US$325 million annually.
Potentially affected goods include art supplies, make-up and cosmetics, apparel, swing boats and other fairground amusements.
The USTR’s public hearing is set for May 4.
Italy’s DST applies to companies that during the previous calendar year generated €750 million (S$1.2 billion) or more in worldwide revenue, and €5.5 million or more in revenue deriving from the provision of digital services in the country.
The USTR estimates the value of the DST payable by US-based firms to Italy at about US$140 million annually.
Potentially affected goods include caviar, handbags, suits and bowties.
The public hearing is set for May 5.
Spain
Spain charges a 3 per cent tax on certain digital services revenue related to online advertising services, online intermediary services, and data-transmission services.
Companies with worldwide revenue of €750 million or more and €3 million in certain digital-services revenues are subject to the DST.
Initial USTR estimates indicate that the value of the DST payable by US-based companies to Spain will be as much as US$155 million annually.
Potentially affected goods include shrimp and footwear.
The public hearing is set for May 6.
Turkey
Turkey’s DST applies to companies that during the previous calendar year generated €750 million or more in worldwide revenues and 20 million lira (S$3.3 million) or more in revenue from providing digital services in the nation.
US based companies would pay Turkey about US$160 million in taxes annually, USTR estimates show.
Carpets, hand-woven rugs and glazed ceramic tiles are among the goods that could be affected.
The public hearing is set for May 7.
India
India’s DST imposes a 2 per cent tax on revenue of non-resident companies generated from a broad range of digital services offered in the country, including digital platform services, digital content sales, digital sales of a company’s own goods, data-related services and software-as-a-service.
The value of the DST payable by US companies to India will be up to about US$55 million annually.
Goods affected include shrimp, blinds, bamboo products, gold jewelry and rattan furniture.
The public hearing is set for May 10.
Austria
Austria’s DST imposes a 5 per cent tax on gross revenue from digital advertising services provided in the country. It only applies to companies with annual global revenue of €750 million or more, and annual revenues from digital advertising services in Austria of €25 million or more.
The DST payable by US-based companies to Austria will be up to about US$45 million annually.
Leather goods, fabrics, optical telescopes and microscopes are among the products that could be affected.
The public hearing is set for May 11.
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