The Office of the U.S. Trade Representative (USTR) has issued findings in three more Section 301 investigations of Digital Service Taxes (DSTs) adopted by Austria, Spain and the United Kingdom. In the reports, the USTR found that each of the DSTs  “discriminates against U.S. companies, is inconsistent with prevailing principles of international taxation, and burden or restricts U.S. commerce.” Ambassador Robert Lighthizer stated, “The taxation of companies that engage in international trade in goods and services is an important issue …. The best outcome would be for countries to come together to find a solution.”

The findings for these three countries determined that:

  • DSTs, “by [their] structure and operation, discriminate[ ] against U.S. digital companies, including due to the selection of covered services and the revenue thresholds.”
  • DSTs are “unreasonable because [they are] inconsistent with principles of international taxation, including due to [their] application to revenue rather than income, extraterritoriality, and retroactivity.”
  • DSTs “burden[ ] or restrict[ ] U.S. commerce.”

DSTs are taxes on revenue that certain companies generate from providing covered digital services to, or aimed at, users in that particular jurisdiction. For example, DSTs may affect multinational businesses providing online advertising services, selling consumer data, or running online intermediary platforms. The findings on each of the DSTs are supported by comprehensive reports, which are available here – Austria, Spain and the United Kingdom.

Despite these findings, the USTR has stated that it will not currently take any specific actions but will continue to evaluate all available options and address matters in future proceedings under Section 301 of the Trade Act of 1974. For additional information on the initiation of these investigations, see Update of June 4, 2020. See also Update of January 7, 2021, for information pertaining to similar investigations into DSTs by India, Italy and Turkey and Update of January 6, 2021, for information regarding the status of the USTR’s investigation into France’s DSTs. USTR investigations remain ongoing for Brazil, the Czech Republic, the European Union and Indonesia. For these four, the DSTs have not yet been imposed and remain under consideration by those countries; as such, USTR also released a brief report providing an update on these investigations.