US to initiate tariff probe into India, Spain over digital tax

The Trump administration is set to start an investigation into India and Spain’s digital services taxes that could lead to tariffs being imposed on the countries’ exports to the U.S., according to people familiar with the plans.

The announcement could come as early as Tuesday, the people said. The probe will determine whether digital services taxes in India and Spain are discriminating against American tech giants like Apple Inc., Alphabet Inc.’s Google and Amazon.com Inc.

The so-called section 301 investigation is led by the Office of the U.S. Trade Representative and it can take months before a decision is made on whether to impose tariffs.

USTR has launched and completed a 301 probe into France’s digital services tax regime but held off on levying duties on the country as the two sides are negotiating a global regime at the Organization for Economic Cooperation and Development.

A USTR spokesman didn’t immediately respond to a request for comment.

Tax Conundrum

The OECD is trying to find agreement among almost 140 countries on a global tax overhaul to address how multinationals—particularly tech giants—are taxed in the countries where they have users or consumers.

India in April expanded a digital tax that’s been in place since 2016, making it much broader than those in Europe. Spain is preparing a digital tax that would go into effect if no international agreement is reached by the end of this year.Several other European countries—including Austria, France, Hungary, Italy, Turkey and the U.K.—have already announced plans for a digital services tax. Many others, including the Czech Republic, Slovakia, Latvia, Norway and Slovenia, have discussed implementing one.OECD officials are pushing to stick to an original deadline to reach an agreement this year, despite setbacks from the global pandemic, however some officials have already acknowledged the project could spill into 2021.