US President Donald Trump's administration on Tuesday announced investigations into foreign digital services taxes it says are aimed squarely at American tech firms.
Following a similar trade investigation against France last year, the US Trade Representative office now is looking into taxes in Britain and the European Union, as well as Indonesia, Turkey and India.
"President Trump is concerned that many of our trading partners are adopting tax schemes designed to unfairly target our companies," USTR Robert Lighthizer said in a statement."We are prepared to take all appropriate action to defend our businesses and workers against any such discrimination," it added.
"A number of U.S. allies such as the EU and the UK are mentioned in this list ... this USTR action is meant to address the issue of digital taxation and should not be treated as a move of aggression against India," said the Indian government source, declining to be identified due to the sensitivity of the matter.
India's trade ministry did not immediately respond to an emailed request from Reuters for comment. The Indian government has so far not commented officially on the USTR investigation.
From April 1, India imposed a new 2% tax on foreign billings, or transactions where companies take payment abroad for digital services provided in India. The tax also applies to foreign e-commerce transactions on sites such as Amazon.com.
The tax is also levied on advertising revenue earned by companies overseas if those ads eventually target customers in India. Alphabet Inc's Google was particularly concerned that it would not be able to swiftly identify countries where such advertising arrangements were in place, Reuters has reported.
Washington opposes the efforts to tax revenues from online sales and advertising, saying they single out US tech giants like Google, Apple, Facebook, Amazon and Netflix.
The US and France have agreed to negotiate till the end of the year over a digital services tax Paris approved in 2019, after USTR found them to be discriminating and threatened retaliatory duties of up to 100 percent on French imports such as champagne and camembert cheese.
Trump has embroiled the US in numerous trade disputes since taking office in 2017, including a months-long trade war with China that cooled with the signing of a partial deal in January.