US to investigate India, other countries for levying taxes on digital services provided by its firms
India will reportedly oppose the move as it believes it has not violated multilateral rules.
The United States announced on Tuesday that it would investigate India and other countries for levying taxes on foreign digital services, that it believes are aimed solely at American firms, AFP reported.
“President Trump is concerned that many of our trading partners are adopting tax schemes designed to unfairly target our companies,” US Trade Representative Robert Lighthizer said in a statement. “We are prepared to take all appropriate action to defend our businesses and workers against any such discrimination.”
The statement said that a provision under Section 301 of the 1974 Trade Act gives the trade representative “broad authority to investigate and respond to a foreign country’s action which may be unfair or discriminatory and negatively affect US Commerce”.
The United States opposes efforts by India and other countries to tax revenues from online sales and advertising, claiming they single out American giants such as Amazon, Netflix, Google, Apple and Facebook. The US and France have agreed to negotiate till the end of the year over a digital services tax, which Paris had approved in 2019, after the US trade representative threatened retaliatory duties of up to 100% on French imports into America.
The United States has targeted India for imposing a 2% tax on all non resident e-commerce companies that sell more than Rs 2 crore worth of services to Indian consumers, The Hindu reported on Wednesday. India’s Finance Minister Nirmala Sitharaman announced the move in the 2020-’21 Union Budget presented in February.
India will oppose the United States’ move as it believes it has not violated multilateral rules while imposing taxes on American firms, an unidentified government official told the newspaper. “New Delhi is likely to submit its comments to the USTR against the investigations as India’s commitments under the General Agreement on Trade in Services allow such taxes,” the official said. “Moreover, India’s taxes do not specifically target American companies. The investigation needs to be dropped.”
Other countries that the United States has targeted include Austria, Brazil, the Czech Republic, the European Union, Indonesia, Italy, Spain, Turkey, and the United Kingdom. However, the US Trade Representative’s Office said it may not be able to hold hearings in the matter at present, due to the coronavirus pandemic.
