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leading independent tax policy
research organization. Since 1937,
our research, analysis, and experts
have informed smarter tax policy at
the federal, state, local, and global
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Section 301 Committee
Office of the United States Trade Representative
600 17th Street, NW
Washington, DC 20508
Re: Docket Number USTR–2020–0022
Tax Foundation Comments on the
Initiation of Section 301 Investigations
of Digital Services Taxes
July 9, 2020
Thank you for the opportunity to provide comments on the Section 301
Investigation. These comments summarize the discriminatory nature of Digital
Services Taxes (DSTs) which arise from their design. These comments also provide
some details on the policies targeted by the Section 301 investigation including the
unique features of the various policies.
DSTs and their Discriminatory Features
• DSTs effectively ring-fence the digital economy by limiting the tax to certain
revenue streams of digital businesses, discriminating in favor of more
traditional sectors of the economy.
• Within sectors, digital businesses are at a relative disadvantage to non-digital
businesses—e.g., online vs. traditional advertising.
A tax policy that singles out specific sectors for special treatment is likely to create
distortions in market behavior. In the case of DSTs, that targeted treatment will
create disadvantages for digital businesses relative to other sectors that provide
similar services. For instance, a business that provides online advertising services
may compete with a business that provides advertising services in print or other
media. Under a DST that covers online advertising, the online advertising business
would be put at a disadvantage relative to that other business.