The Trump administration on Monday issued a chilling threat to countries not to pursue “digital tax regimes” against the American tech-behemoths that are generating tens of billions of dollars of revenue through targeted advertising or running a digital marketplace.

Even though India is not named among the countries that are considering imposing digital services taxes on GAFA — Google, Apple, Facebook, and Amazon — companies, Washington’s latest threat could have implications for any digital tax policy initiative being considered by New Delhi, analysts said.

The USTR’s dire threat is also an indirect warning to India and South Africa that have been calling for a “rethink” and proper assessment of the existing moratorium for not imposing customs duties on electronic transmissions at the World Trade Organization (WTO), because of the huge revenue loss and ‘asymmetries” arising from the moratorium.

The WTO’s moratorium for not imposing customs duties on electronic transmissions has caused a revenue loss to the tune of $10 billion for developing countries, according to a recent study by the United Nations Conference on Trade and Development (UNCTAD). It will expire at the end of this month if it is not approved by the WTO members next week at the General Council meeting.

Tax on French imports

Against this backdrop, the US Trade Representative Ambassador Robert Lighthizer on Monday proposed tariffs up to 100 per cent against $2.4 billion of French imports in response to the French digital-services tax on GAFA companies.

The USTR has threatened that Washington would impose duties under the controversial Section 301 on imports from countries that intend to pursue the digital services taxes.

Interestingly, the USTR’s threat came at a time when Google has announced that it “will start charging 6 per cent digital tax for its paid services in Malaysia,” according to a news report on December 2. The Google tax “is in line with the expansion of the Sales & Service Tax legislation in Malaysia to cover digital services.”

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The USTR claimed that the French digital services tax applies only to American companies while ignoring tax services provided by the French companies.

“Statements by French officials responsible for proposing and enacting the French DST show that the law deliberately targets US companies,” the USTR’s office said.

The USTR’s office also claimed that officials in the French government referred to the digital services tax as “GAFA tax”, implying it is imposed on Google, Apple, Facebook, and Amazon.

The French Finance Minister Bruno Le Maire said, in a radio broadcast, on December 2 suggested that the US went back on its earlier decision to find a mutually-acceptable solution through negotiations at the Paris-based Organisation for Economic Cooperation and Development (OECD).

“They [the US] are now telling us that they don’t want this solution and are simply going to impose new sanctions on France,” Le Maire said. “My message is clear: We will never, never, never abandon our will to tax fairly tech giants,” he added.

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