(Bloomberg)—Lobbying groups representing the biggest U.S. Internet-based companies called on the U.S. to negotiate for the removal of digital-service taxes charged by nations ranging from the U.K. to India, with at least one endorsing retaliatory tariffs.
The levies imposed by Austria, India, Italy, Spain, Turkey and the U.K. cost American companies $3.1 billion, Rachael Stelly, a lawyer for the Computer and Communications Industry Association, said at a U.S. Trade Representative hearing on Monday. The group’s members include some of the biggest online firms including Amazon.com Inc. (No. 1 in the 2021 Digital Commerce 360 Top 1000) to Facebook Inc.
The hearing is the first in a series planned for this week as USTR weighs whether to hit the nations with retaliatory tariffs under section 301 of the Trade Act of 1974 that could total almost $1 billion annually. Goods entering the U.S.—ranging from Italian ties and Spanish shoes to Turkish Kilim rugs and British beauty supplies—could face tariffs of as much as 25% annually.
The Organization for Economic Cooperation and Development has been trying since 2015 to broker a global agreement on how to capture profits of companies with little or no physical presence in a market where they do business, and aims to do so by the middle of this year. But countries frustrated with the slow pace of negotiations began moving forward with their own unilateral measures in 2019.
The Computer Association “encourages USTR to use remedial tools at its disposal to deter countries and send a strong message to other countries,” Stelly said. “Tariffs should only be used in limited circumstances, in a targeted manner, and where there is a clear strategy in place designed to change the behavior of a trading partner. USTR’s proposed actions appear to meet this standard.”
Still, Stelly said that “an OECD solution, not discriminatory national digital taxes that incite trade conflicts, remains the best path forward.”
The taxes present a major administrative burden, industry representatives say, because companies must set up separate compliance measures for each national tax, and tech groups are alarmed to see the number of measures growing. The U.S. government should engage with other countries mulling digital taxes of their own—including Brazil, Canada, and Vietnam—said Jordan Haas, director of trade policy at the Internet Association, which also represents companies in the industry.
Groups representing importers and brick-and-mortar retailers argued against the tariffs at the hearing, saying they will be paid by American consumers. Blake Harden, from the Retail Industry Leaders Association that includes Target Corp. and Best Buy Co., said that the tariffs are unlikely to convince countries to remove the digital taxes. Harden, the group’s vice president for international trade, pointed to the U.S. trade war with China, saying that tariffs there have proved ineffective in changing the nation’s behavior.