US probes Turkey over ‘discriminatory’ taxes

US Trade Representative Robert Lighthizer. (File photo)
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Updated 05 June 2020

US probes Turkey over ‘discriminatory’ taxes

  • If Ankara’s scheme is found to be unfairly targeting American tech firms, there may be action

ANKARA: The US has launched an investigation into new digital services taxes (DST) brought in by Turkey to see if they unfairly discriminate against American businesses.

The Office of the US Trade Representative (USTR) announced on Wednesday that it would be scrutinizing the Turkish taxes along with similar levies adopted or being considered by the EU, the UK, India, Italy, Austria, Spain, Brazil, the Czech Republic, and Indonesia.

Authorities in all of the countries being probed have until July 15 to provide their public comments to the USTR.

If the Turkish tax scheme is found to be unilaterally and unfairly targeting US tech companies such as Facebook, Amazon, Netflix, and Google, the country may face US tariffs on strategic products.

In a statement, US trade representative, Robert Lighthizer, said: “(American) President (Donald) Trump is concerned that many of our trading partners are adopting tax schemes designed to unfairly target our companies. We are prepared to take all appropriate action to defend our businesses and workers against any such discrimination.”

Turkey introduced a new DST law in December 2019 to collect revenues derived from digital services provided by multinational companies having no headquarters in Turkey. The controversial legislation targets tech firms having a high number of users within Turkish territories, but which pay little in tax.

However, compared to similar laws in other countries, Turkey’s DST rate is one of the highest in the world.

All companies having revenues in Turkey worth 20 million Turkish lira (2.6 million euros) and consolidated group revenue of 750 million euros or more, should pay DST – that is 7.5 percent of gross revenue from sales in Turkey, applicable from April 1.

Online advertising services, sales of digital content, and digital platform services will be taxed under the new law.

Experts believe that the US move to investigate Turkey is aimed at restricting other countries from adopting similar taxes that hit American businesses.

Dr. Erdal Ekinci, a partner at Istanbul-based Esin Attorney Partnership, said the USTR might argue that Turkey’s DSTs give “less favorable” treatment to US service suppliers than to their EU and local competitors.

If Ankara did not take a backstep, the US could retaliate in a similar way as it did with France. In December, the US proposed increasing tariffs by up to 100 percent on $2.4 billion worth of French products after the country’s digital taxes were found to be discriminatory for US companies. Consequently, France had to suspend the digital tax until the conclusion of relevant talks at the Organization for Economic Cooperation and Development.

Technology expert, Burak Dalgin, told Arab News that there was a risk of double taxation in Turkey in terms of digital services provision. “The multinational companies have to pay both taxes for their digital services and also for withholding tax for their operations in Turkey. Such taxation schemes should be designed via international consultation,” he said.

Dalgin, who is a founding member of Turkey’s new breakaway DEVA Party led by ex-finance tsar Ali Babacan, noted that Turkey would appoint an ambassador to Silicon Valley (in California) if the fledgling party came to power.

“We need a comprehensive perspective that develops our technology ecosystem, not the other way around,” he added.

Currently, only Google has a liaison office in Istanbul, while Netflix may open an office soon. According to sector data, total revenues generated by technology giants based in Turkey are about $2.3 billion.

“The Turkish DST rate of 7.5 percent is also extremely high compared to other jurisdictions that are generally around 2 percent or 3 percent, such as 2 percent in the UK or 3 percent in France,” Ekinci said.

“If the USTR imposes sanctions to Turkey, it would definitely affect adversely the economic and commercial relationship between the two countries. Those sanctions may be the introduction of new additional customs duties and importation regime restrictions to the products exported from Turkey to the US,” he added.

During the first quarter of 2020, the US ranked second among Turkey’s import activities, and was the fifth destination country exporting Turkish products.

Ekinci said: “The Turkish government may compare the state income generated through the DSTs collected from the US companies and the economic burden of those sanctions, and as a result of this comparison, Turkey may choose to revise the DST legislation in a way to eliminate any discrimination claims.”


UN food chief: Beirut could run out of bread in 2 1/2 weeks

Updated 23 min 59 sec ago

UN food chief: Beirut could run out of bread in 2 1/2 weeks

  • Beasley said a ship with 17,500 metric tons of wheat flour should arrive in Beirut “within two weeks"

UNITED NATIONS: The head of the UN food agency said Monday he’s “very, very concerned” Lebanon could run out of bread in about 2 ½ weeks because 85% of the country’s grain comes through Beirut’s devastated port — but he believes an area of the port can be made operational this month.
David Beasley, who is in Beirut assessing damage and recovery prospects, told a virtual UN briefing on the humanitarian situation following last week’s explosion in the Lebanese capital that “at the devastated site, we found a footprint that we can operate on a temporary basis.”
“Working with the Lebanese army, we believe that we can clear part of that site,” Beasley said. “We’ll be airlifting in a lot of equipment, doing everything we can.”
Beasley said he had met with Cabinet ministers — who all resigned later Monday — and told them the UN needs “absolute cooperation now, no obstacles” because people on the streets are angry and said they need international help but “please make certain that the aid comes directly to the people.”
For the first time since last week’s blast, two ships docked at Beirut’s port on Monday including one carrying grain, according to state media.
The head of the workers union at the port, Bechara Asmar told Al-Jadeed TV that since the grain silos were destroyed by the explosion, the material will be pumped directly to trucks or bags after being sanitized.”
“This is a glimmer of hope,” Asmar said about the first arrivals adding that the port’s 5th basin where the ships docked remains intact despite the blast.
Beasley, the executive director of the World Food Program, said a ship with 17,500 metric tons of wheat flour should arrive in Beirut “within two weeks, and that’s to put bread on the table of all the people of Lebanon and that will give us a bread supply for 20 days.”
“While we’re doing that, we’ve got a 30-day supply of about 30,000 metric tons of wheat that we’re bringing in, and then another 100,000 metric tons over the next 60 days after that,” Beasley said.
Najat Rochdi, the UN humanitarian coordinator for Lebanon, told a press conference after briefing UN members that Beasley went to the port with engineers to assess what can be done.
“They are very optimistic to start actually this rehabilitation as soon as this week to increase the capacity of the port of Beirut,” she said.
Rochdi said she understands a ship will be arriving Thursday with some construction material, followed by a ship with wheat and grain, “to address the issue of food security and to hopefully make sure Beirut is not going to be short of bread.”
UN humanitarian chief Mark Lowcock told diplomats the “swift and wide-ranging” humanitarian response is just the first of a three-phased response to the tragedy.
“The second — recovery and reconstruction — will cost billions of dollars and require a mix of public and private finance,” he said. ”The third element is responding to the Lebanon’s pre-existing socioeconomic crisis which is already exacerbated by COVID-19.”
Lowcock, the undersecretary-general for humanitarian affairs and emergency relief coordinator, stressed the Beirut explosion last Tuesday “will have repercussions far beyond those we see in front of us now.”
He urged donors, international financial institutions and the wider international community to “come together and put their shoulder to the wheel,” stressing that the Lebanese people will be served best by a collective response.
UN Secretary-General Antonio Guterres told UN member nations the voices of Lebanon’s angry people “must be heard.”
“It is important that a credible and transparent investigation determine the cause of the explosion and bring about the accountability demanded by the Lebanese people,” he said. “It is also important that reforms be implemented so as to address the needs of the Lebanese people for the longer term.”
Guterres also pledged that “the United Nations will stand with Lebanon to help alleviate the immediate suffering and support its recovery.”