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Current Affairs

US investigation into digital services tax

Date: 05 June 2021 Tags: World Economy

Issue

The US government has decided to suspend the punitive taxes on countries such as India, UK, Turkey etc until negotiations and investigations are completed.

 

Background

The previous Trump regime had imposed taxes on products from several countries including India, citing unfair trade practices.

 

Details

  • The US is currently carrying out negotiation with the concerned countries in various platforms such as OECD and G20.

  • The taxes and tariffs are suspended only temporarily and the government still has powers under Section 301 to impose in future.

 

Investigation on digital service taxation

  • The US had conducted investigations into the taxes imposed by several countries on digital giants such as Google, Apple, Facebook and Amazon.

  • They said that the taxation imposed by these countries were discriminative against the international taxation principles and burdened these companies.

  • US has recently imposed 25% taxes on several goods from these countries but later had them suspended until investigations and negotiations are taking place.

 

India’s digital tax

  • The central government had imposed a 2 percent digital service tax on transactions carried out by non-resident digital operators having turnover above 2 crore.

  • The scope of the tax has been expanded to include services that earlier were restricted to only digital advertising.

  • The law will effectively tax e-commerce operators outside the country who are involved in online sale of goods and providing services.