[Federal Register Volume 85, Number 109 (Friday, June 5, 2020)]
[Notices]
[Pages 34709-34711]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-12216]


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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

[Docket No. USTR-2020-0022]


Initiation of Section 301 Investigations of Digital Services 
Taxes

AGENCY: Office of the United States Trade Representative.

ACTION: Notice of initiation of investigations, and request for 
comments.

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SUMMARY: The U.S. Trade Representative is initiating investigations 
with respect to Digital Services Taxes (DSTs) adopted or under 
consideration by Austria, Brazil, the Czech Republic, the European 
Union, India, Indonesia, Italy, Spain, Turkey, and the United Kingdom. 
The Office of the United States Trade Representative (USTR) is seeking 
public comments in connection with these investigations.

DATES: To be assured of consideration, you must submit written comments 
by July 15, 2020.

ADDRESSES: You should submit written comments through the Federal 
eRulemaking Portal: http://www.regulations.gov (Regulations.gov). 
Follow the instructions for submitting comments in section IV. The 
docket number is USTR-2020-0022. For issues with on-line submissions, 
please contact the USTR Section 301 line at 202-395-5725.

FOR FURTHER INFORMATION CONTACT: For procedural questions concerning 
the submission of written comments, please contact the USTR Section 301 
line at 202-395-5725.
    For questions concerning the investigation, please contact Patrick 
Childress, Assistant General Counsel, 202-395-3150; or Robert Tanner, 
Director for ICT Services & Digital Trade, 202-395-6125.
    For questions regarding specific jurisdictions covered by the 
investigations, please contact: For the EU, EU member States, Turkey, 
and the United Kingdom: Michael Rogers, Director for Europe, 202-395-
2684; for Brazil, Courtney Smothers, Senior Director for MERCOSUR 
Countries, 202-395-7657; for India, Brendan Lynch, Deputy Assistant 
U.S. Trade Representative, South and Central Asian Affairs, 202-395-
2851; and for Indonesia, Bart Thanhauser, Director for Southeast Asia 
and the Pacific, 202-395-4088.

SUPPLEMENTARY INFORMATION: 

I. Digital Services Taxes

    Over the past two years, various jurisdictions have taken under 
consideration or adopted taxes on revenues that certain companies 
generate from providing certain digital services to, or aimed at, users 
in those jurisdictions. They are referred to as Digital Services Taxes 
or DSTs. Available evidence suggests the DSTs are expected to target 
large, U.S.-based tech companies. These jurisdictions include:
    Austria: In October 2019, Austria adopted a DST that applies a 5% 
tax to revenues from online advertising services. The law went into 
force on January 1, 2020. The tax applies only to

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companies with at least [euro]750 million in annual global revenues for 
all services and [euro]25 million in in-country revenues for covered 
digital services.
    Brazil: Brazil is considering a legislative proposal entitled the 
``Contribution for Intervention in the Economic Domain'' or CIDE. If 
adopted, CIDE would apply to the gross revenue derived from digital 
services provided by large technology companies.
    The Czech Republic: The Parliament of the Czech Republic is 
considering a draft law that would apply a 7% DST to revenues from 
targeted advertising and digital interface services. The tax would 
apply only to companies generating [euro]750 million in annual global 
revenues for all services and CZK 50 million in in-country revenues for 
covered digital services.
    The European Union: The European Commission is considering a DST as 
part of the financing package for its proposed COVID-19 recovery plan. 
The EU DST is based on a 2018 DST proposal that was not adopted. The 
2018 EU proposal included a 3% tax on revenues from targeted 
advertising and digital interface services, and would have applied only 
to companies generating at least [euro]750 million in global revenues 
from covered digital services and at least [euro]50 million in EU-wide 
revenues for covered digital services.
    India: In March 2020, India adopted a 2% DST. The tax only applies 
only to non-resident companies, and covers online sales of goods and 
services to, or aimed at, persons in India. The tax applies only to 
companies with annual revenues in excess of approximately Rs. 20 
million (approximately U.S. $267,000). The tax went into effect on 
April 1, 2020.
    Indonesia: Earlier this year, Indonesia adopted an electronic 
transaction tax that targets cross-border, digital transactions. 
Further implementing measures are required for the new tax to go into 
effect.
    Italy: Italy has adopted a DST. The measure includes a 3% tax on 
revenues from targeted advertising and digital interface services. This 
tax applies only to companies generating at least [euro]750 million in 
global revenues for all services and [euro]5.5 million in in-country 
revenues for covered digital services. The tax applies as of January 1, 
2020.
    Spain: Spain is considering a draft DST. The measure would apply a 
3% tax to revenues from targeted advertising and digital interface 
services. This tax would apply only to companies generating at least 
[euro]750 million in global revenues for all services and [euro]3 
million in in-country revenues for covered digital services.
    Turkey: Turkey has adopted a DST. The measure applies a 7.5% tax to 
revenues from targeted advertising, social media and digital interface 
services. The tax applies only to companies generating [euro]750 
million in global revenues from covered digital services and TL20 
million in in-country revenues from covered digital services. The 
Turkish President has authority to increase the tax rate up to 15%. The 
law went into effect on March 1, 2020.
    The United Kingdom: The United Kingdom is considering a DST 
proposal as part of its Finance Bill 2020. The measure would apply a 2% 
tax on revenues above [pound]25 million to internet search engines, 
social media, and online marketplaces. The tax applies only to 
companies generating at least [pound]500 million in global revenues 
from covered digital services and [pound]25 million in in-country 
revenues from covered digital services. The bill is in the final stages 
of adoption by Parliament, and if passed, payments would be due from 
affected companies in 2021.

II. Initiation of Section 301 Investigations

    Section 302(b)(1)(A) of the Trade Act of 1974, as amended (Trade 
Act), authorizes the U.S. Trade Representative to initiate an 
investigation to determine whether an act, policy, or practice of a 
foreign country is actionable under section 301 of the Trade Act. 
Actionable matters under section 301 include, inter alia, acts, 
polices, and practices of a foreign country that are unreasonable or 
discriminatory and burden or restrict U.S. commerce. An act, policy, or 
practice is unreasonable if the act, policy, or practice, while not 
necessarily in violation of, or inconsistent with, the international 
legal rights of the United States, is otherwise unfair and inequitable.
    Pursuant to section 302(b)(1)(B), USTR has consulted with 
appropriate advisory committees. USTR also has consulted with agencies 
on the Section 301 Committee.
    In light of concerns with the DSTs adopted or under consideration 
by the jurisdictions discussed above, the U.S. Trade Representative has 
initiated Section 301 investigations with respect to DSTs adopted or 
under consideration by Austria, Brazil, the Czech Republic, the 
European Union, India, Indonesia, Italy, Spain, Turkey, and the United 
Kingdom. Pursuant to section 303(a) of the Trade Act, the U.S. Trade 
Representative has requested consultations with the governments of 
these jurisdictions.
    Pursuant to section 304 of the Trade Act, the U.S. Trade 
Representative must determine whether the act, policy, or practice 
under investigation is actionable under Section 301. If that 
determination is affirmative, the U.S. Trade Representative must 
determine what action to take.
    The investigation initially will focus on the following concerns 
with DSTs: Discrimination against U.S. companies; retroactivity; and 
possibly unreasonable tax policy. With respect to tax policy, the DSTs 
may diverge from norms reflected in the U.S. tax system and the 
international tax system in several respects. These departures may 
include: Extraterritoriality; taxing revenue not income; and a purpose 
of penalizing particular technology companies for their commercial 
success.
    In addition to these areas of concern with DSTs, USTR invites 
comments on other aspects that may warrant a finding that one or more 
of the covered DSTs are actionable under Section 301.

III. Request for Public Comments

    You may submit written comments on any issue covered by the 
investigations. In particular, USTR invites comments with respect to:
     Concerns with one or more of the DSTs adopted or under 
consideration by the jurisdictions covered in these investigations.
     Whether one or more of the covered DSTs is unreasonable or 
discriminatory.
     The extent to which one or more of the covered DSTs 
burdens or restricts U.S. commerce.
     Whether one or more of the covered DSTs is inconsistent 
with obligations under the WTO Agreement or any other international 
agreement.
     The determinations required under section 304 of the Trade 
Act, including what action, if any, should be taken.
    In light of the uncertainties arising from COVID-19 restrictions, 
USTR is not at this time scheduling a public hearing in these 
investigations. USTR will provide further information in a subsequent 
notice if a hearing is to be held in these investigations.

IV. Procedures for Written Submissions

    All submissions must be in English and sent electronically via 
Regulations.gov. To submit comments via Regulations.gov, enter docket 
number USTR-2020-0022. Find a reference to this notice and click on the 
link entitled `comment now!' For further information on using the 
Regulations.gov website, please consult the resources provided on the 
website

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by clicking on `how to use regulations.gov' on the bottom of the 
www.regulations.gov home page. USTR will not accept hand-delivered 
submissions.
    The Regulations.gov website allows users to submit comments by 
filling in a `type comment' field or by attaching a document using an 
`upload file' field. USTR prefers that you submit comments in an 
attached document. If you attach a document, it is sufficient to type 
`see attached in the `type comment' field. USTR strongly prefers 
submissions in Adobe Acrobat (.pdf). If you use an application other 
than Adobe Acrobat or Word (.doc), please indicate the name of the 
application in the `type comment' field.
    File names should reflect the name of the person or entity 
submitting the comments. Please do not attach separate cover letters to 
electronic submissions; rather, include any information that might 
appear in a cover letter in the comments themselves. Similarly, to the 
extent possible, please include any exhibits, annexes, or other 
attachments in the same file as the comment itself, rather than 
submitting them as separate files.
    For any comments submitted electronically that contain business 
confidential information (BCI), the file name of the business 
confidential version should begin with the characters `BCI.' You must 
clearly mark any page containing BCI by including `BUSINESS 
CONFIDENTIAL' on the top of that page and clearly indicating, via 
brackets, highlighting, or other means, the specific information that 
is BCI. If you request business confidential treatment, you must 
certify in writing that disclosure of the information would endanger 
trade secrets or profitability, and that the information would not 
customarily be released to the public. Filers of submissions containing 
BCI also must submit a public version of their comments. The file name 
of the public version should begin with the character `P.' Follow the 
`BCI' and `P' with the name of the person or entity submitting the 
comments. If these procedures are not sufficient to protect BCI or 
otherwise protect business interests, please contact the USTR Section 
301 line at 202-395-5725 to discuss whether alternative arrangements 
are possible.
    USTR will post submissions in the docket for public inspection, 
except BCI. You can view submissions on the Regulations.gov website by 
entering docket number USTR-2020-0022 in the search field on the home 
page.

Joseph Barloon,
General Counsel, Office of the United States Trade Representative.
[FR Doc. 2020-12216 Filed 6-4-20; 8:45 am]
 BILLING CODE 3290-F0-P