The US has said that digital taxes in Spain, Austria and the UK are discriminating against American tech companies, paving the way for tariffs and setting the scene for transatlantic trade conflict as the Biden administration takes power.
Over the summer, US trade representative Robert Lighthizer launched a string of probes into countries that are adopting digital services taxes, which Washington claims are an unfair trade practice.
The USTR said on Thursday that it had concluded its probes into some of the European countries and found that their digital tax plans were “inconsistent with prevailing principles of international taxation.”
The US will now consider potential trade remedies, including applying tariffs to imports from the country.
Some countries have either already introduced or plan to introduce a digital services tax, arguing that tech companies pay too little tax on the profits they make in many countries, partly because they record them in low-tax jurisdictions such as Ireland.
Last week, the US said that India, Turkey and Italy had discriminated against US tech companies.
An earlier US investigation into France — the European country with the most advanced digital services tax rules — had resulted in plans to impose tariffs of 25 per cent.
However, last week the US said it would hold off on applying the tariffs and instead co-ordinate them with any tariffs that might arise from its other investigations into digital taxation.
The US and France originally agreed last year to allow more time for talks on a multilateral taxation framework overseen by the OECD, the Paris-based organisation of rich countries. As part of that pause, France agreed to temporarily stop collecting its digital tax.
But in November, French tax authorities began demanding millions of euros in tax payments from US technology groups like Facebook and Amazon.
The demands for collection pose a difficulty for president-elect Joe Biden, who has said he would look to smooth out diplomatic and trade tensions with European countries. On Capitol Hill, however, there is opposition among Democrats to countries imposing their own digital services taxes rather than negotiating a multilateral deal through the OECD.
France has said it wants an EU proposal in early 2021 for taxation of digital services across Europe in case the OECD talks do not progress. But its preferred option remains an international solution through the organisation.
The latest ruling from the US is also a particular challenge to the UK, which is scheduled to begin collecting its digital tax in April, while it attempts to negotiate a free trade agreement with the US.