India Will Defend Its Digital Tax as U.S. Starts Probe

(Bloomberg) -- India will defend its decision to widen a tax on digital services after the U.S. started a probe to determine whether the policy discriminates against American tech giants, a person with the knowledge of the matter said.

The government isn't considering changing its stance on including e-commerce within the scope of its levy, the person said, asking not to be identified as they're not authorized to talk with media. The broader tax was announced in Prime Minister Narendra Modi's latest budget in February and has already come into effect.

India is among ten nations facing a probe on digital taxes that have either been adopted or are under consideration, the United State Trade Representative office said Tuesday, with officials to assess whether the levies discriminate against the likes of Apple Inc., Alphabet Inc.'s Google and Amazon.com Inc. The same mechanism, known as a 301 investigation, was the precursor to the U.S. imposing tariffs on $360 billion of imports from China.

Alongside defending its tax, India's government will also negotiate with the Trump administration to seek to prevent the imposition of tariffs in case the USTR concludes that the policy is unfair, the person said.

The Organization for Economic Cooperation and Development is trying to find agreement among almost 140 countries on a global tax overhaul to address how multinationals -- particularly tech giants -- are taxed in the countries where they have users or consumers.

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