US could levy tariffs in response to India's "digital tax"

Shalini Ojha
·3-min read

US could levy tariffs in response to India
US could levy tariffs in response to India

20 Nov 2020: US could levy tariffs in response to India's "digital tax"

A retaliatory action from the United States is expected over the taxes levied on tech companies, like Facebook, in a few countries, a Bloomberg report said on Friday.

The US could soon release results of its probe concerning India, Austria, and Italy's decision to tax local revenue generated by internet companies.

In June, the US Trade Representative had started the investigation.

Act: Act allows US to levy tariffs for "unfair" practices

At least ten countries were being probed by USTR, under Section 301 of the US Trade Act of 1974. This act allows the country to retaliate for practices that it deems unfair.

Using the same section, the US defended its tariffs on Chinese goods.

Determinations will soon be made for Brazil, the Czech Republic, Indonesia, Spain, Turkey, the UK, and the European Union bloc.

France: Earlier, US levied tariffs on France for similar reason

The US is known to retaliate sternly in response to digital taxes. Last year, it levied $2.4 billion taxes on French wines, cheeses, and other products.

After tit-for-tat allegations were leveled by both nations, it was decided that tariffs would be put on hold until the end of 2020, but France said recently that it will collect the contentious tax in mid-December.

OECD: A truce isn't expected before summer of 2021

The countries had bought time, hoping that a truce would be reached, but that seems unlikely before mid-2021.

Finance Minister Bruno Le Maire blamed the US for stalling the agreement, spearheaded by the Organization for Economic Cooperation and Development, which planned a replacement of individual country taxes with a global plan.

He also urged other European countries to levy taxes just like France.

Fact: Should giants be taxed less? No, said France's minister

"The only question we have to ask is whether we can accept that the big winners of this crisis, the digital giants, should continue to be taxed less than other big companies -- my answer is no, and thrice no," Le Maire said.

Statement: Another minister is hoping Biden calms the raging tensions

While earlier, Le Maire had said the November elections might not change the US' stand on the matter, his colleague Franck Riester hoped President-elect Joe Biden would calm trade tensions, fuelled by his predecessor Donald Trump.

"I hope we are going to be able to rebuild the trans-Atlantic relationship with the Biden administration," Trade Minister Riester said, adding that France was "optimistic."

Future: Next year, Belgium, Norway, and Latvia could also impose taxes

Now that no OECD deal is present, a large number of countries could opt for digital taxes to get a share of the massive revenue generated by internet companies. Belgium, Norway, and Latvia could introduce the taxes next year.

It is still unclear how the Biden administration will tackle this issue, though Capitol Hill favors responding to countries targeting American companies with retaliatory taxes.