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US suspends tariffs on UK, India, European nations in digital tax dispute

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Washington is seeking agreement on a global minimum tax on corporate profits and holding off on penalizing countries for digital services taxes./AFP
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Jun 03, 2021 - 09:31 AM

WASHINGTON — The US government announced Wednesday it is suspending for six months punitive tariffs on Britain, India and four European nations while it works to resolve a dispute over digital services taxes.

The decision comes at the conclusion of a year-long investigation into taxes that Washington says discriminated against big US tech companies like Apple, Amazon, Google and Facebook.

The 25 percent duties were never imposed, but were intended to also target Austria, Italy, Spain and Turkey.

While trade authorities ruled the tariffs were justified, “The United States is focused on finding a multilateral solution to a range of key issues related to international taxation, including our concerns with digital services taxes,” US Trade Representative (USTR) Katherine Tai said in a statement.

President Joe Biden’s administration is pushing for a 15 percent global minimum corporate tax that aims to resolve the issue of corporations sheltering profits in low-tax nations.

The decision comes just ahead of a two-day meeting in London starting Friday of finance ministers from the Group of Seven rich countries to hammer out a deal on the tax issue.

Officials then would try to win broader support from the G20 and the 38-member Organization for Economic Co-operation and Development (OECD) which has led the effort to harmonize taxation.

However, Ireland, which has become a haven for many multinationals, has expressed opposition to the global minimum tax.

G7 leaders will meet later in June, following by a G20 finance ministers meeting in July.

– Committed to a solution –

USTR made clear it still has the option to impose the punitive duties on goods from the countries that adopted the digital services taxes.

“The United States remains committed to reaching a consensus on international tax issues through the OECD and G20 processes,” Tai said.

“Today’s actions provide time for those negotiations to continue to make progress while maintaining the option of imposing tariffs… if warranted in the future.”

The so-called Section 301 investigation ruled that the tax “discriminates against US companies, is inconsistent with prevailing principles of international taxation and burden or restricts US commerce.”

USTR in January also suspended 25 percent tariffs on $1.3 billion in French goods imposed in the dispute.

In March, USTR terminated investigations of Brazil, the Czech Republic, the European Union and Indonesia, since those governments did not implement a digital services tax.

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