USTR Criticizes India, Italy, Turkey For Digital Services Tax, Holds Off Retaliatory Action

The U.S. Trade Representative (USTR) office released findings in a press release on Wednesday that the digital tax regulations in India, Italy, and Turkey are not in line with the international taxation principles, and it negatively impacts United States commerce.

Despite the findings, the USTR has decided to hold off retaliatory actions for now.

What Happened: The investigation centered around the Digital Services Tax (DST) imposed on American tech companies. The U.S. trade body published individual findings report for each of the three countries on its website.

Many of the U.S. tech giants including Amazon Inc (NASDAQ: AMZN), Facebook Inc (NASDAQ: FB), Apple Inc (NASDAQ: AAPL), and Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG) fall under the purview of these DST regulations.

India levies a 2% tax liability for revenues generated locally through digital platforms and online content, software-as-a-service, etc. Italy is imposing a 3% tax rate on the total taxable revenues, whereas Turkey introduced the possibility of raising the maximum allowable tax rate to 15%. Turkey’s current DST rate is 7.5%.

Why It Matters: According to Bloomberg, the Czech Republic and Spain will begin digital tax collections from January 2021, while other European countries like Norway, Belgium, and Latvia will initiate the rule this year.

The USTR kicked off the Section 301 investigations against these three countries in June 2020, in tandem with the DST considerations in Austria, Brazil, the Czech Republic, the European Union, Indonesia, Spain, and the United Kingdom per the press release.

France carried through with its local version of the DST in 2019, and after talks with President Donald Trump faltered, began collecting in mid-December 2020. The USTR pondered implementing a 25% tariff levy on certain French products with an estimated total import value of $1.3 billion per year, reports Reuters.

Price Action: On Thursday, AMZN closed 2.49% lower at $3,138.38, FB was down 2.83% to $263.21, AAPL fell 3.32% at $126.66, and GOOG closed at $1,735.29 with a 0.32% decrease.