Former W&M Chair Says Tariffs on European Countries, Turkey and India Over DSTs Coming
Kevin Brady, who led the House Ways and Means Committee when Congress passed the Trump tax cut package, told reporters that Washington insiders expect "the [next Trump] administration will reinstate [Section] 301 investigations" that were begun when countries moved to collect digital services taxes from U.S. tech firms.
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Those investigations were completed in 2021, with specific Harmonized Tariff Schedule lines ready to be hit with 25% tariffs on British goods, Italian goods, Spanish goods, Turkish goods, Indian goods and Austrian goods (see 2106020047). There also was an investigation for France, but it was suspended when France stopped moving toward a DST (see 2001210029).
There are DSTs of varying designs in the countries listed above, plus Denmark, Hungary, Poland, Portugal and Switzerland and a half-dozen others outside of Europe, according to the Tax Foundation. Canada will start collecting from its DST in June, and it is expected to collect $875 million annually; the U.S. is disputing the law's legality under USMCA (see 2408300048).
Brady, a Republican who represented Texas, said Trump "may have additional strategies" to convince countries not to collect DSTs.
The Biden administration suspended all the Section 301 investigations as countries around the world worked on an international tax agreement in the Organization for Economic Cooperation and Development. But Brady cast doubt that the U.S. would ever ratify such a treaty, as he said the Biden administration didn't consult with Congress on its negotiations, and said the deal gives away some of the U.S. tax base.
Ways and Means Republican leaders have been critical of the OECD agreement, but also heard from witnesses who said there is no better alternative, and compromise is necessary (see 2403080036).
In response to a question from International Trade Today, Brady acknowledged that the wait for Generalized System of Preferences benefits program renewal -- already four years long -- and other trade preference action may be prolonged due to the extensive work needed in Ways and Means and the Senate Finance Committee to shape a bill to extend expiring provisions of the 2017 tax law and make other tax reforms.
"Tax reform eats up a lot of oxygen," he said, calling it "extremely time-consuming." When his committee led the way in 2017, it took from July to December to pass a bill; House leadership has set a deadline of April 20, just three months away.
Still, Brady said he is hopeful that GSP and other preference programs can get attention, saying "progress can be made" even with the tax reform effort going on.