In response to India’s imposition of digital service tax on nonresident e-commerce operators, US has proposed to impose retaliatory tariffs up to 25 per cent on a wide variety of Indian products. The products included on list range from shrimps and basmati rice to gold and silver items. Reportedly, the digital taxes had targeted in-country revenues of digital services platforms, such as Facebook, Google, and Amazon.com.
Washington holds that India’s digital services tax, also known as equalization levy or Google tax, is unreasonable or discriminatory and burdens or restricts US trade. Trying to give a tough and an equal fight to the Indian authorities, the tariffs on all the products are intended to amount the same that India gets from the American based countries through digital tax.
Initial estimates indicated that the value of the digital services tax payable by US-based company groups to India was up to approximately $55 million per year, the USTR thus indicated that the retaliatory tariffs could add up to the very same amount.
An official tackling the matter said that “The Indian government will examine the proposed action with the stakeholders concerned and take suitable measures keeping its trade and commercial interest of the country and overall interest of its people,”.
On Friday, US Trade Representative Katherine Tai stated that she was maintaining the threat of US tariffs on goods from not only India but also from Austria, Britain, Italy, Spain and Turkey in retaliation to their digital services taxes.
In a statement issued by Tai, she announced that her office would proceed with steps to impose potential tariffs, including filing public notices and collecting public comments as part of investigations. The procedure launched, was originally brought into force by the Trump administration against the taxes aimed largely at American internet companies and e-commerce platforms.
As it was quite widely known, Trump supported the ideology of “America first” and found tariffs of various nations unfavorable but with his leaving the oval office, such protectionist laws were expected to be done away with. But Joe Biden’s administration’s recent move to continue some archaic laws send a strong message to countries around the world that America still practices the law of serving American interest first.
As aforementioned, the Office of the United States Trade Representative (USTR) announced the decision despite President Joe Biden’s renewed cooperative commitments to pursue a global agreement on digital services taxes through the Organization for Economic Cooperation and Development (OECD).
Tai briefed on her first negotiating tactic after she took office last week that the USTR would terminate “Section 301” tariff investigations against Brazil, the Czech Republic, the European Union and Indonesia.
“The United States remains committed to reaching an international consensus through the OECD process on international tax issues,” Tai said in a statement. “However, until such a consensus is reached, we will maintain our options under the Section 301 process, including, if necessary, the imposition of tariffs.”
The Internet Association, which represents major U.S. internet platforms, vehemently applauded US’s move to keep the tariff threat alive as it mandated that the internet companies and e commerce companies kept customers job market alive.
The trade group issued a statement stating that “Today’s move by USTR is an important affirmation in pushing back on these discriminatory trade barriers as the U.S. continues to work to find a viable solution at the OECD,”.
Not only does India bear the brunt of the US’s wrath but so does France through its exquisite champaign. United States recently disclosed that it is also maintaining a more advanced tariff threat against $1.3 billion in imports of French Champagne, cosmetics, handbags and other goods in retaliation for France’s digital tax.
In June 2020, Section 301 was used by the USTR to investigate into the taxes by different nations that discriminated against US. Thus, the tax investigations were also filed against the countries like Austria, Britain, India, Spain and Turkey and it was found that they discriminated against U.S. technology companies and were inconsistent with international tax norms.
Section 301 was terminated against countries like European union, Brazil, the chez Republic and Indonesia as no evidence of digital tax discrimination was found. But fai maintained that the section 301 could be imposed against them if they adopted a discriminating digital tax regime in future.
It is to be noted that Washington had held consultations with New Delhi on the issue on November 5, 2020 where India had argued that the purpose of the equalization levy was to ensure reasonableness, fair competition and to exercise the ability of the governments to tax businesses that have a close nexus with the Indian market through their digital operations.
The official said that “It is a recognition of the principle that in a digital world, a seller can engage in business transactions without any physical presence, and governments have a legitimate right to tax such transactions,”.
However, the US was not convinced about the reasoning and on January 6, 2021, determined that India’s levy was unreasonable or discriminatory and burdened or restricted US commerce, and therefore was actionable under sections 301 of the Trade Act.