US technology companies opposes Digital Tax by India government, want action

The Internet Association which represents companies like Google, Amazon, Facebook, and eBay, has pressed for an action against India due to digital services tax. The association disagree on the two percent equalisation levy was unreasonable and discriminated against US companies. The body said this in its comment to the US Trade Representative (USTR) on Section 301 investigation, launched last month.

However, IBM, the US Chamber of Commerce (USCC), and the Consumer Technology Association (CTA), which has Adobe, 3M, and Accenture as members, have opposed retaliatory tariffs, arguing that they will hurt American companies, and has urged the USTR to work towards a multilateral solution on the issue.

The US has started an investigation against India for levying a 2 percent digital tax on technology majors. The investigation is to determine whether it “unfairly targets” American companies like Amazon, Google, and Facebook. It has also launched a probe against nine others, including Austria, Brazil, Indonesia, Italy, Spain, and Turkey, for levying or considering digital services taxes. The last date for public comments was July 15. Section 301 of the US Trade Act empowers the USTR to investigate a trading partner’s policy action that may be deemed unfair or discriminatory and negatively affects US firms.

“The Internet Association appreciates USTR investigation as the digital industry believes that the Indian equalisation levy is unreasonable and discriminates against US companies by creating a targeted burden on all US exports to India through the internet,” the Internet Association said.

It further pointed out although the tax went into effect on April 1, 2020, many key details remained undefined. It said that countries, including India, had brought in digital tax on US firms, often to use the revenue from it to fund local economic recovery. Meanwhile, computer hardware giants have pitched for multilateral solutions to the digital tax issue within the Organization for Economic Cooperation and Development (OECD) framework, while opposing retaliatory tariffs by the US.

It added that other governments would likely apply counter-retaliatory measures, affecting multiple US sectors, calling the use of Section 301 “unwise and unwarranted”.

It urged the USTR to continue engaging through the OECD.

“IBM urges the Administration to reengage in the OECD tax discussions to protect US business interests and ensure the stability and certainty of international tax rules,” it said. India, through an amendment to the Finance Bill 2020-21, imposed a 2 per cent digital tax on trade and services by non-resident e-commerce operators with a turnover of over Rs 2 crore, expanding the scope of the equalisation levy, which till last year only applied to digital advertising services.

E-commerce operators have to pay the tax at the end of each quarter.

The US had suspended participating in OECD discussions over last month to put in place a multilateral instrument to bring these companies into the tax net.