European digital taxes are unfair to large tech, the US gross sales agent says

The collection of digital service taxes in various European countries will cost Apple and other American companies millions of dollars in the future, and the US sales representative is considering applying retail tariffs to avenge or prevent the application.

Italy, Turkey, and India have followed France to impose a tax on foreign digital goods, which has led to further investigation by the U.S. trade agent’s office. In November France began taxing multinational companies at 3% of total regional sales, a practice the USTR describes as “discriminatory against US technology companies”.

The USTR initiated Section 301 investigations to determine if tariffs or other retaliation were required. In France, the US introduced a 25% tariff for handbags and cosmetics, which should come into effect on January 6, 2021. Reuters was unable to reach anyone for comment on the matter and could not determine whether the tariff had started enforcement.

The USTR published the results of its Section 301 investigations that it would not take any additional action at this point. They will continue to consider any options that could include additional trade tariffs for India, Italy and Turkey.

The USTR says taxes from the countries are “unreasonable” and “inconsistent with the principles of international taxation, also because of their application to revenue rather than income, extraterritorial application and a lack of tax security”.

France sought taxes after it became impatient with the European Union itself pushing for tax reforms. The US left talks on changes in international taxes, which led the EU to postpone its plans for new taxes. The new tax package aims to curb tax abuse and anti-competitive behavior while increasing transparency.

Apple will be one of the largest American companies to be affected by the changes in digital taxes. Apple has tax loopholes by housing its overseas revenue in Ireland, but this practice by Apple and other companies has been scrutinized. The EU asked Apple to pay back taxes of USD 14.4 billion, which has since been appealed and a counter-complaint has been lodged.

Apple claims it never engaged in illegal tax practices and welcomes tax reform across Europe. The USTR is trying to protect American companies that the new tax law could directly target, but Apple and others appear to have taken no action against future digital tax laws.

It is unclear whether and when new tariffs will come into force. Commercial tariffs often lead to price increases for customers buying goods from the locals who are tariffed rather than charging the seller.