Jon Johnson – Current Developments in Digital Services Taxes, and Potential Pitfalls

May 3, 2021

There have been significant developments respecting digital services taxes (DSTs) since the last January 12 Intelligence Memo on the US suspension of retaliatory tariffs against France for its tax.

While these tariffs remain on hold, the USTR has taken further action respecting digital taxes imposed by India, Italy, Turkey, Austria, Spain and the UK. In notices issued on March 29, the USTR states its intention to impose Section 301 tariffs and invites public comment, with hearings taking place in mid-May.

There have been developments on the Canadian side as well. Last month’s budget sets out detailed plans for a Canadian DST. It would apply at a rate of 3 percent on certain revenue set out in the budget document. The tax would apply only to businesses with global revenue from all sources of 750 million euros or more in the previous calendar year, and revenue associated with Canadian users of more than $20 million in the particular calendar year. Budget 2021 projects revenue from its DST of $3.4 billion from 2021/22 to 2025/6.