[Federal Register Volume 86, Number 12 (Thursday, January 21, 2021)]
[Notices]
[Pages 6406-6407]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-01174]


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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE


Notice of Determination Pursuant to Section 301: The United 
Kingdom's Digital Services Tax

AGENCY: Office of the United States Trade Representative (USTR).

ACTION: Notice.

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SUMMARY: The U.S. Trade Representative has determined that the United 
Kingdom's Digital Services Tax (DST) is unreasonable or discriminatory 
and burdens or restricts U.S. commerce and thus is actionable under 
Section 301.

FOR FURTHER INFORMATION CONTACT: For questions concerning the 
investigation, please contact Thomas Au or Patrick Childress, Assistant 
General Counsels at

[[Page 6407]]

(202) 395-0380 and (202) 395-9531, respectively, Robert Tanner, 
Director, Services and Investment at (202) 395-6125, or Michael Rogers, 
Director, Europe and the Middle East at (202) 395-2684.

SUPPLEMENTARY INFORMATION:

I. The United Kingdom's DST

    Based on information obtained during the investigation, USTR has 
prepared a comprehensive report on the United Kingdom's DST (UK DST 
Report). The UK DST Report, which is posted on the USTR website at 
https://ustr.gov/issue-areas/enforcement/section-301-investigations/section-301-digital-services-taxes, includes a full description of the 
United Kingdom's DST. To summarize, the United Kingdom's DST was 
introduced as part of the Finance Bill 2020 and adopted on July 22, 
2020. The United Kingdom's DST applies a two percent tax on the 
revenues of certain search engines, social medial platforms and online 
marketplaces. The United Kingdom's DST applies only to companies with 
digital services revenues exceeding [pound]500 million and United 
Kingdom digital services revenues exceeding [pound]25 million. 
Companies became liable for the DST on April 1, 2020.

II. Proceedings in the Investigation

    On June 2, 2020, the U.S. Trade Representative initiated an 
investigation of the United Kingdom's DST pursuant to section 
302(b)(1)(A) of the Trade Act of 1974, as amended (Trade Act). 85 FR 
34709 (June 5, 2020) (notice of initiation). The notice of initiation 
solicited written comments on, inter alia, the following aspects of the 
United Kingdom's DST: discrimination against U.S. companies; 
retroactivity; and possibly unreasonable tax policy. With respect to 
tax policy, USTR solicited comments on, inter alia, whether the DST 
diverged from principles reflected in the U.S. and international tax 
systems including extraterritoriality; taxing revenue not income; and a 
purpose of penalizing particular technology companies for their 
commercial success.
    Interested persons filed over 380 written submissions in response 
to the notice of initiation. The public submissions are available on 
www.regulations.gov in docket number USTR-2020-0022.
    Under Section 303 of the Trade Act, the U.S. Trade Representative 
requested consultations with the Government of the United Kingdom 
regarding the issues involved in the investigation. Consultations were 
held on December 4, 2020.
    As noted, based on information obtained during the investigation, 
USTR has prepared and published the UK DST Report, which includes a 
comprehensive discussion on whether the acts, policies, and practices 
under investigation are actionable under Section 301(b) of the Trade 
Act. The UK DST Report supports findings that the United Kingdom's DST 
is unreasonable or discriminatory and burdens or restricts U.S. 
commerce.

III. Determination on the Act, Policy, or Practice Under Investigation

    Based on the information obtained during the investigation, and 
taking account of public comments and the advice of the Section 301 
Committee and advisory committees, the U.S. Trade Representative has 
made the following determination under sections 301(b) and 304(a) of 
the Trade Act (19 U.S.C. 2411(b) and 2414(a)): the act, policy, or 
practice covered in the investigation, namely the United Kingdom's DST, 
is unreasonable or discriminatory and burdens or restricts U.S. 
commerce, and thus is actionable under section 301(b) of the Trade Act. 
In particular:
    1. The United Kingdom's DST, by its structure and operation, 
discriminates against U.S. digital companies, including due to the 
selection of covered services and the revenue thresholds.
    2. The United Kingdom's DST is unreasonable because it is 
inconsistent with principles of international taxation, including due 
to application to revenue rather than income, extraterritoriality, and 
retroactivity.
    3. The United Kingdom's DST burdens or restricts U.S. commerce.

IV. Further Proceedings

    Sections 301(b) and 304(a)(1)(B) of the Trade Act provides that if 
the U.S. Trade Representative determines that an act, policy, or 
practice of a foreign country is unreasonable or discriminatory and 
burdens or restricts United States commerce, the U.S. Trade 
Representative shall determine what action, if any, to take under 
Section 301(b). These matters will be addressed in subsequent 
proceedings under Section 301.

Joseph Barloon,
General Counsel, Office of the United States Trade Representative.
[FR Doc. 2021-01174 Filed 1-19-21; 8:45 am]
BILLING CODE 3290-F0-P