July 5, 2020

Volume X, Number 187

July 03, 2020

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Tariff War Continues – Digital Services Tax Moves Into the Crosshairs of Section 301

The Office of the US Trade Representative (USTR) is requesting comments for newly initiated Section 301 investigations on digital services tax (DST) adopted or under consideration by Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey and the United Kingdom. Comments are due by July 15. 

On June 2, USTR announced the initiation of the new investigations, and it is requesting comments to inform their investigations into the various DSTs, and their impacts on US-based technology companies.  Stakeholders impacted by the DSTs should submit comments to help guide the USTR investigation, but companies engaged in bilateral goods trade must also prepare for potential retaliatory tariffs to follow.

Over 135 countries and jurisdictions are engaged in multilateral talks aimed at securing an agreement on tax policies regarding online sales by multinationals, an issue of particular import to tech and media companies that are more deeply affected.  DSTs are of increasing interest to governments under pressure to raise revenue to support COVID-19 economic relief measures.  The United States is particularly opposed to these tax actions, arguing they are discriminatorily designed to apply mainly to major US tech companies.

As a first step, USTR will conduct an investigation into whether these DSTS are actionable under Section 301 (i.e., whether they “are unreasonable or discriminatory and burden or restrict U.S. commerce. An act, policy, or practice is unreasonable if the act, policy, or practice, while not necessarily in violation of, or inconsistent with, the international legal rights of the United States, is otherwise unfair and inequitable.”).  If USTR decides to proceed, it will likely hold a second comment period regarding potential goods that could be subject to tariffs from these jurisdictions, or other actions the United States may take in response.

© Copyright 2020 Squire Patton Boggs (US) LLPNational Law Review, Volume X, Number 156


About this Author

Ludmilla Kasulke International Trade Attorney

Ludmilla (Milla) Kasulke draws on her experience in both domestic and international policy to assist clients on trade matters. Milla provides multinational corporations, sovereign governments and entities, and quasi-government entities with advice on a wide range of trade policy, legal, and regulatory issues. She has been actively engaged in all aspects of the Section 232 process, including the exclusion petition process, and regularly advises clients on the impacts of current and potential new actions. Milla also regularly counsels clients on the impacts of current and potential new trade...

Jeff VanderWolk Tax Strategy & Benefits Attorney Squire Patton Boggs Washington DC

Jeff VanderWolk helps organizations, businesses and individuals understand and respond to global developments in cross-border taxation. Drawing on both technical expertise and commercial savvy, he helps clients make sense of complex, emerging areas of tax law such as the taxation of the digital economy, transfer pricing and treaty-based structuring.

Jeff has extensive experience in private practice and government and agency work, most recently as head of the Tax Treaty, Transfer Pricing and Financial Transactions Division at the Organization for Economic Co-operation and Development’s (OECD) Centre for Tax Policy and Administration in Paris. There, he was at the forefront of shaping international tax policies and responsible for the rollout of the multilateral instrument currently being implemented in several countries around the world. He has also worked at the heart of US tax policymaking, gaining deep knowledge of tax reform and its practical applications. He has advised clients in Asia Pacific, Europe and the US on tax planning, structuring and compliance across numerous industry sectors.

Earlier in his career, Jeff served as executive director at the Washington DC office of an international accounting firm (2013-16), where he advised on international tax legislative and policy developments. He also served as International Tax Counsel to the US Senate Committee on Finance (2011-13) and as a Special Counsel in the Office of the Chief Counsel at the Internal Revenue Service (2005-06). In private practice, Jeff worked extensively on tax policy matters and advised clients globally on significant transactions as an international tax adviser – serving as partner both at international law and accountancy firms, in London and Hong Kong, for more than a decade until 2005, and as managing director and head of Tax for Asia Pacific at a major US financial institution for three years (2006-09).

Frank Samolis, Squire Patton Boggs Law Firm, International Trade Attorney

Frank Samolis is co-chair of our International Trade Practice. He advises clients on international trade matters, including trade law, trade policy and legislation, and international trade negotiations. He is also chair of our India Practice Group and the leader of our Colombia Desk, Latin America Task Force.

Frank handles matters before the Office of the US Trade Representative, other Executive Branch Trade agencies, the US International Trade Commission, US Court of International Trade, US Customs Service and the US Congress. Frank has represented foreign sovereigns or foreign...