A new rift in Turkey-US relations: Digital services tax

The U.S. trade representative said it investigating Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey and the United Kingdom for implementing or planning to put forward new taxes on digital giants.

The OECD is due to present a plan by the end of 2020.

The U.S. signaled at the start of the year that it would support some aspects of a digital tax if the plan would be voluntary rather than compulsory for American companies, reported CNBC.com.

Following a similar trade investigation against France last year, the Office of the United States Trade Representative (USTR) is now looking into taxes in Britain and the European Union, as well as Indonesia, Turkey and India.

“President (Donald) Trump is concerned that many of our trading partners are adopting tax schemes designed to unfairly target our companies,” U.S. Trade Representative Robert Lighthizer said in a statement. “We are prepared to take all appropriate action to defend our businesses and workers against any such discrimination.”

In a Federal Register notice, the USTR said the probe would cover digital services taxes adopted or under consideration by Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey and Britain. The trade agency said it has requested consultations with these governments.

The announcement came after the U.S. Commerce Department said it would investigate whether imports of the metal vanadium violate national security, a sign that the Trump administration is actively pursuing new trade barriers despite the coronavirus pandemic.

Trump based his nearly two-year trade war with China on a probe into Beijing’s intellectual property and technology transfer practices under Section 301 of the U.S. Trade Act of 1974, which authorizes action, including tariffs, to end foreign government practices that curb U.S. commerce.

Broad negotiations through the Organisation for Economic Cooperation and Development (OECD) to set a global standard for digital taxes have proven elusive, and the coronavirus pandemic has slowed them down.

The U.S. and France have agreed to negotiate till the end of the year over a digital services tax Paris approved in 2019, after the USTR found them to be discriminating and threatened retaliatory duties of up to 100% on French imports such as champagne and camembert cheese.

France agreed in January to delay the implementation of the tax until December, saying they would try to reach a deal through the OECD.

Turkey’s parliament in November 2019 passed new laws on tax regulations including new taxes on digital services.

The regulation saw a 7.5% tax on digital advertising and content. The tax includes all manners of online advertisements and services that allow any digital content to be listened to, watched or downloaded.

Spain’s plans to tax tech companies’ revenues do not discriminate against any country, a government source told Reuters.

The Internet Association industry trade group said the probe was needed since a growing number of countries had proposed or enacted digital taxes despite the OECD negotiations.

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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and www.paraanaliz.com and has contributed to the financial daily Referans and the liberal daily Radikal.