Trump Administration Escalates Global Fight Over Taxing Tech

Trump Administration Escalates Global Fight Over Taxing Tech
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WASHINGTON — The Trump administration said on Tuesday that it would open an investigation into taxes on digital commerce that have been adopted or proposed in nine countries and the European Union, escalating a global battle that will affect where big American tech companies like Facebook and Amazon pay taxes.

The administration’s move could ultimately lead to American tariffs on imports from Brazil, Britain, India and a host of other countries, heightening the chances of another global trade dispute that results in retaliatory taxes on U.S. goods.

The investigation, which will be conducted by the United States Trade Representative, could also complicate global negotiations that have been underway for more than a year and are aimed at reaching a multinational consensus on how to tax internet commerce that crosses borders.

At issue are efforts spreading across Europe and beyond to impose so-called digital services taxes on economic activity generated online. Those taxes deviate from many traditional international tax regimes by affecting revenues earned by a company where they are generated — regardless of whether the company has a physical presence there. For example, India imposed a 2 percent tax in April on online sales of goods and services to people in India by large foreign firms. The European Union has revived its push for a similar tax as a way to help fund response measures to the coronavirus.

“President Trump is concerned that many of our trading partners are adopting tax schemes designed to unfairly target our companies,” Robert E. Lighthizer, the trade representative, said in a statement. “We are prepared to take all appropriate action to defend our businesses and workers against any such discrimination.”

While the U.S. has been part of the multinational digital tax discussions, negotiations ran into trouble this year, shortly before the spread of the coronavirus plunged countries around the world into lockdowns. The Trump administration had been pushing for a provision that would effectively allow some American companies to choose whether to be governed by any new tax system created by a global agreement.

The companies that are most likely to be affected by many countries’ digital taxes are American technology giants, including eBay and Google, but some proposals could apply to any large companies that do business online, not just tech firms.

Jordan Haas, the director of trade policy for the Internet Association, whose members include Facebook, Google and Amazon, said in a statement that the group appreciated the trade representative’s ongoing work pushing back on the taxes.

“The U.S. must continue sending a strong message to trading partners that targeted discriminatory taxes against U.S. firms are not an appropriate solution,” he said.

A spokesman for Google, Jose Castaneda, reiterated that the company supported efforts to reach an international agreement on digital taxes.

Two top senators, Charles E. Grassley, an Iowa Republican and Ron Wyden, an Oregon Democrat, said the administration’s investigation was warranted given the proliferation of digital taxes around the world.



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