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Tech Groups Highlight Digital Taxes Outside Scope of U.S. Probe

July 16, 2020, 5:45 PM

The U.S. trade investigation into 10 digital taxes leaves out even more national measures, including in Belgium and Kenya, business groups said.

The U.S. Trade Representative’s office announced in June it was opening Section 301 investigations into proposed or enacted digital tax measures in Austria, Brazil, the Czech Republic, the EU, India, Indonesia, Italy, Spain, Turkey, and the U.K.

The measures seek to tax the revenues of tech giants, many of which are U.S.-based. A growing number of countries are taking up such taxes because they say the traditional global tax rules—which give countries taxing rights over profits connected to a physical presence in their jurisdiction—mean digital companies aren’t sufficiently taxed in the locations where they have users. The U.S. has said the measures discriminate against American business.

“We expect that additional countries will continue to pursue these taxes,” the Silicon Valley Tax Directors Group wrote to the USTR. The group pointed to a 1.5% digital tax in Kenya that will go into effect next year, a digital tax proposal in Belgium, and talk of a digital tax in countries including Latvia and Canada.

The Internet Association also highlighted measures in other countries, including Nigeria and Hungary, that should be investigated as they “would discriminate against U.S. digital companies.”

The Brazilian and Indonesian governments also responded to the USTR about their respective measures targeted in the investigations. Both said they were committed to a global solution on an overhaul of digital tax rules.

The Brazilian measure is just a legislative proposal, and “still at the first stages of proceedings at that house,” the Brazilian government wrote, while the Indonesian government wrote that its electronic transaction tax “takes into account such global consensus.”

To contact the reporter on this story: Isabel Gottlieb in Washington at igottlieb@bloombergtax.com

To contact the editors responsible for this story: Meg Shreve at mshreve@bloombergtax.com; Sony Kassam at skassam1@bloombergtax.com

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