The United States Trade Representative (USTR) has announced the possible imposition of tariffs against the UK and other countries for discriminating against US digital companies in terms of international taxations.
The action follows on from a Section 301 investigation of digital service taxes (DSTs) which reportedly found that the DSTs adopted by Austria, India, Italy, Spain, Turkey, and the UK were “unreasonable, discriminatory” and restricted US commerce.
In the UK, a DST is applied to a group’s business that provides a social media service, search engine or an online marketplace to UK users.
These businesses are liable to DST when the group’s worldwide revenues from these digital activities are more than £500m and more than £25m of these revenues are derived from UK users. If the group’s revenues exceed these thresholds, its revenues derived from UK users will be taxed at a rate of 2%.
These taxations have affected US companies such as Amazon and Google who paid £13.7m and £44m in charges respectively.
The trade representative stated that a 25% taxation on goods from the UK into the US which is equivalent to approximately $325m (£245m) per year could come into effect if an agreement is not reached.
Ambassador Katherine Ta said: “The United States is committed to working with its trading partners to resolve its concerns with digital services taxes, and to addressing broader issues of international taxation.
“The United States remains committed to reaching an international consensus through the OECD process on international tax issues. However, until such a consensus is reached, we will maintain our options under the Section 301 process, including, if necessary, the imposition of tariffs.”