June 03,2020

Andrew Campbell 

In recent years, digital tax policies have become more and more common in many countries around the world. According to the US Trade Representative (USTR), Digital Services Tax (DST) has been questionable in pertaining to the context of international tax and trade laws. For instance, the UK’s DST has been applied to tech companies from April 1 at a 2% tax on the revenues earned from UK users of online marketplaces, search engines, and social media platforms.

The USTR announced June 2 of Investigations into DST policies in 9 countries and the EU under Section 301 of the 1974 Trade Act. The policies targeted by the USTR include some that have been implemented in Austria, India, Indonesia, Italy, Turkey, and the UK as well as some that are just proposed in Brazil, Czech Republic, Spain, and the EU. The announcement follows the 2019 French DST investigation, after which the USTR threatened to levy significant tariffs in retaliation against France.

The US new “section 301 investigation” could lead to an international tax and trade war under tariff threats. This provision gives the USTR broad authority to investigate, although it may take months, and respond to any foreign country’s action which may be unfair or discriminatory against US commerce, mainly US-based tech companies. Meanwhile, the Organization for Economic Cooperation and Development (OECD) has been trying to forge consensus among nearly 140 countries on a multinational DST policy.