USTR says Austria, Spain, UK digital taxes discriminate against U.S. firms

WASHINGTON (Reuters) - The U.S. Trade Representative’s office on Thursday said it has found that digital services taxes imposed by Austria, Spain and the United Kingdom discriminate against U.S. companies and are inconsistent with international tax principles, but will take no immediate action.

Releasing the results of a “Section 301” investigation into the countries’ digital taxes, U.S. Trade Representative Robert Lighthizer said the trade agency will continue to evaluate all available options.

“The best outcome would be for countries to come together to find a solution,” Lighthizer said in a statement.

The announcement here mirrors findings last week in similar digital services taxes imposed by India, Italy and Turkey and follows USTR's decision to suspend planned tariffs on French cosmetics, handbags and other goods as punishment for France's digital services tax.

The decisions not to impose immediate tariffs give some breathing room to President-elect Joe Biden’s USTR nominee, Katherine Tai, to try to negotiate a settlement of the tax disputes after she takes office in coming weeks.

The Section 301 reports find that the foreign digital taxes discriminate against big U.S. tech firms, such as Google, Facebook, Apple and, impeding U.S. commerce. The U.S. Treasury has been trying to negotiate a global agreement on digital taxation through the Organization for Economic Cooperation and Development, but talks have bogged down in recent months.

The issue also has been complicated by U.S. President Donald Trump’s feud with the big tech companies during his waning days in office, one source familiar with the matter told Reuters.

The source added that it made sense to hold off on imposing unilateral tariffs at this point to allow the OECD talks to proceed and avoid tying the hands of the Biden trade team. USTR officials have stepped up efforts to ensure a smooth transition to the new administration since mid-December, the source said.

Reporting by David Lawder, additional reporting by Andrea Shalal; Editing by Chizu Nomiyama and Alexandra Hudson