International tax impact of the America First trade policy

It is widely recognised that a stable and predictable tax environment helps to provide the confidence needed to encourage investment, innovation, and growth over the long term. However, the adoption of an “America First” Trade Policy brings uncertainty for multinationals around current US policies and possible counter measures by other jurisdictions, both in terms of trade and the international taxing rules under discussion at the OECD and the UN. The America First policy may lead to the proliferation of tariffs or import duties and the previously agreed OECD Two Pillar solution to the operation of the international tax rules no longer has the support of the United States. With the US no longer intending to implement the Pillar One proposals, there is no longer an agreed basis for removing existing unilateral digital service taxes (“DSTs”) and many other countries may look to impose their own, new DSTs. The US sees such taxes as discriminatory on the basis that they are largely aimed at the US tech giants and so may well look to impose its own retaliatory measures, again possibly in the form of more tariffs or higher taxes.

Our article considers the possible impact of the America First Trade Policy on international taxation, the risk of disruption to supply chains and what can and should businesses be looking to do in response to the uncertainties it has given rise to. It may be that there are opportunities to simplify supply chains, for example, to mitigate, as far as possible, the cost of tariffs. Even where that is not the case, there is the question of allocating those risks within the global value chain of the business and ensuring that the contractual framework and transfer pricing policy is clear and consistent in its application in relation to such issues.

At Simmons & Simmons, we understand the complexities businesses face in this environment. We can help you review your supply chains and discuss any risks and opportunities that might exist, with a focus on reviewing:

• Transaction values of imported goods to determine whether disaggregation of intercompany services or intangibles is possible;
• Intercompany contractual relationships to ensure that conduct is in line with the terms set out in the agreements;
• Uncertain tax positions and outstanding tax audits or disputes.

Our tax team can also support you with any discussions or submissions with tax authorities to achieve certainty on a proactive basis.

We invite you to get in touch with us to discuss how we can assist you in navigating these challenging times.

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