In recent years, the US has watched the spread of unilateral digital taxes across the world with concern, seeing them as unfairly targeting its big tech companies. In some instances, it has launched trade investigations and threatened retaliatory tariffs. In fact, this is one of the drivers behind the recent OECD/G20 agreement on a two-pillar approach to changing the international tax framework (for more on what this involves, read our recent blog).
In October, the US reached an agreement with five European countries (Austria, France, Italy, Spain and the UK) to terminate its trade actions against them in return for the withdrawal of their digital services taxes (DSTs) and in November reached similar agreements with Turkey and India. While some might have expected that to be the end of the story, we explain in our latest Tax Matters podcast why the situation is more complex than that. Joshua Critchlow interviews Lorand Bartels, Katharina Kubik and Brin Rajathurai about the implications of these recent agreements and what trade law challenges may remain in relation to DSTs. The team also discuss developments on the horizon that will need to be examined from a trade perspective, such as the EU’s potential digital levy proposals and the UK’s plans to look into a new online sales tax (as announced at the Autumn Budget). Finally, they explore the hurdles to getting the OECD agreement implemented in the US and how trade law precedents might provide some potential solutions.