US Declarations
The Office of the United States Trade Representative (USTR) has concluded that the digital taxes introduced by Spain, Austria and the United Kingdom discriminate against US companies and are “inconsistent with existing principles of international taxation” because they burden or restrict US trade. “Taxation of companies engaged in international trade in goods and services is an important issue,” said US Trade Representative Robert E. Lighthizer. “The best outcome would be for countries to come together to find a solution,” he added, according to a statement issued by the US office.
While the US government is not taking any specific action at this time on these findings on the investigation of digital taxes established by several countries, it says it will “continue to evaluate all available options”.
The Google Tax Investigation
The investigation into the Spanish ‘Google tax’ and similar taxes adopted in Austria and the United Kingdom began in June 2020. On the 6th of January, the office also gave its opinion on the digital taxes established in India, Italy, and Turkey, reaching the same conclusion: they are discriminatory against US companies.
Digital taxes are under consideration or on development in four other jurisdictions (Brazil, Czech Republic, the EU as a whole and Indonesia), but are not currently in force.
The Spanish Case
The tax on certain digital services was approved in Spain on the 7th of October 2020. This is a tax that levies 3% on revenue from online advertising, internet intermediation services and data transmission. It affects global companies with a minimum of 750 million in revenue worldwide and more than 3 million in Spain.
According to the detailed report on the Spanish tax prepared by the USTR, this limit of 750 million euros means that sixty companies meet this condition, of which 34, 56.7%, have their parent company in the United States, while only two are Spanish. The USTR also regrets that the type of services taxed are those in which American companies are leaders. “Consequently, Spain’s digital services tax discriminates against US companies,” the report concludes.
If instead of companies with revenues of more than 750 million being taxed, companies with sales of more than 50 million would be taxed, there would be 249 companies subject to the tax. Of these, 80 (32.1%) would be American and 20 (8%) Spanish.
The USTR Document
The document stresses that the tax is levied on income and not on profits and that it is an extra-territorial tax since it states, it applies to income “not connected to a presence in Spain”.
The tax authorities claim that it does not discriminate against or attack any country, but affects large companies, regardless of their origin. They also explain that it is inspired by the proposal made by the European Commission and that other countries such as France also have such a tax. In any case, the government has insisted on its defence of a global agreement on this tax. And the Executive’s commitment is that when such an agreement is reached within the framework of the OECD, the Spanish tax will be brought into line with the agreement.
Google and Tobin Tax
Google was exploiting loopholes to avoid paying taxes; The Google Tax is being imposed in the EU as a response to this, Google saved itself as much as $3.7 billion in 2016 by moving 16 billion euros between Ireland, the Netherlands, and Bermuda.
Both the so-called ‘Google tax’ and the ‘Tobin tax’ (the tax on financial transactions) came into force on the 16th of January. It has become clear that the settlement of the tax on digital services, which is paid quarterly, will be postponed until July when the second quarter settlement will also have to be made. The tax on financial transactions, which has a monthly settlement, will postpone the settlement for the days of January from its entry into force to the month of April, which will also be when the settlements for February and March will have to be made.
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