New US trade war fears over taxes on tech giants

Fears have been raised about the prospect of a new US trade war with several different countries over their decision to impose taxes on tech giants.

The office of the US Trade Representative (USTR) has said that taxes imposed by several countries impact US companies like Apple, Amazon, Google, and Facebook – and are therefore discriminatory


A number of US tech giants, including Apple, Amazon and Google, have used tax-avoidance measures to either avoid paying any tax in countries in which sales are made, or to pay significantly less tax than is paid by businesses based in those countries.

Apple, for example, funnelled through to Ireland all the sales revenue from Apple Stores and online sales across Europe, thereby avoiding corporation tax in each of those individual countries. It then paid an extremely low rate of tax in Ireland.

To address this, a number of countries put in place measures to ensure that at least some corporation tax was paid locally. Italy acted first, back in 2015, objecting to Apple claiming that its Italian company was merely a ‘consultant.’ Apple agreed to pay the full tax bill levied by Italy on profits made from sales in the country. A similar case was settled in France when Apple agreed to settle tax bills going back some ten years.

Since then, there have been a number of attempts to agree consistent tax rules, both within the European Union and globally through the OECD – the latter approach backed by Apple CEO Tim Cook.

However, some countries have grown impatient at the slow progress, and have decided to act unilaterally through measures like imposing a low rate of tax on revenues within a country, to avoid arguments about where tech giants claim profits are generated. France was one of the countries to do so.

New US trade war fears

Reuters reports that the USTR was already planning to retaliate against France, and is now considering action against three other countries.

Digital services taxes adopted by India, Italy and Turkey discriminate against U.S. companies and are inconsistent with international tax principles, the U.S. Trade Representative’s office said on Wednesday, paving the way for potential retaliatory tariffs.

USTR, releasing the findings of its “Section 301” investigations into the digital taxes, said it was not taking specific actions at this time, but “will continue to evaluate all available options” […]

USTR had set a Jan. 6 deadline for implementing 25% tariffs on French cosmetics, handbags and other imports valued at around $1.3 billion annually in retaliation against the French digital taxes. But it was unclear late on Wednesday whether collections of those duties would begin as scheduled.

It’s currently unclear whether Trump will remain president for the brief remainder of his term. It was yesterday reported that vice-president Pence took control of the official response to the attempted coup, and there have been widespread calls for the 25th amendment to be invoked to remove Trump from his position. Either way, it’s likely that many of the more controversial aspects of government policy will remain uncertain until Biden assumes the presidency.

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