On March 26, 2021, the Office of the U.S. Trade Representative (USTR) issued several Federal Register notices concerning the ongoing Section 301 investigations of Digital Service Taxes (DSTs) adopted or under consideration by 10 U.S. trading partners. For six countries, the investigations will continue and the USTR is seeking public comment on possible trade actions. For four other jurisdictions, the USTR has decided to terminate the investigations at this time without action. These investigations under Section 301 of the 1974 Trade Act were initiated on June 2, 2020, out of concern that many U.S. trading partners are adopting tax schemes designed to unfairly target U.S. companies. See Updates of June 4, 2020, January 7, 2021 and January 14, 2021 for further details.
In the ongoing investigations involving Austria, India, Italy, Spain, Turkey and the United Kingdom, the USTR issued separate Federal Register notices seeking comment on possible trade actions to preserve procedural options before the conclusion of the statutory one-year time period for completing the investigations. The notices indicate that the USTR is considering tariffs of up to 25 percent on “on an aggregate level of trade that would collect duties on goods” from each country “in the range of the amount of the DST” that country is expected to collect from U.S. companies. In each notice, the USTR requests the following information from interested parties:
- The level of the burden or restriction on U.S. commerce resulting from the specific country’s DST, including the amount of DST payments owed by U.S. companies, the annual growth rate of such payments, and other effects, such as compliance costs.
- The appropriate aggregate level of trade to be covered by additional duties.
- The level of the increase, if any, in the rate of duty.
- The specific products to be subject to increased duties, including whether the tariff subheadings listed in the attached Annex to each Federal Register notice should be retained or removed, or whether tariff subheadings not currently on the list should be added.
Any written comments must be submitted no later than April 30, 2021. If seeking to appear and testify at the multi-jurisdictional hearing on May 3, 2021, a party must submit a written request with a summary of the expected testimony no later than April 21, 2021. Any post-hearing rebuttal comments must be submitted by May 10, 2021. There will also be a series of country-specific DST hearings after the May 3 multi-jurisdictional hearing; dates for these hearings and any deadlines for post-hearing rebuttal comments vary and are set forth in each Federal Register notice. Documents must be submitted via the electronic portal at https://comments.ustr.gov/s and should be placed under the appropriate docket number for each country.
In the final Federal Register notice, the USTR announced that it was terminating the Section 301 investigations involving Brazil, the Czech Republic, the European Union (EU) and Indonesia because “these jurisdictions either have not adopted or not implemented a DST during the period of investigation.” In the notice, the USTR stated that it would continue to monitor the status of any proposed or adopted DSTs that the EU and three countries may consider. If any of these jurisdictions proceeds to adopt or implement DSTs, the USTR noted that it may initiate new investigations.
In a brief statement, Ambassador Katherine Tai stated, “The United States is committed to working with its trading partners to resolve its concerns with digital services taxes, and to addressing broader issues of international taxation …. [and] remains committed to reaching an international consensus through the OECD process on international tax issues.”