Chris Cioffi & Lauren Vella (Bloomberg Law): Republican Floats Package to Deter DSTs, Boost Foreign Credits

A key Republican tax writer is floating a new package of international tax proposals that includes a tool to blunt digital services taxes — a longstanding target of criticism by the Trump administration and lawmakers on both sides of the aisle.

The legislation, introduced by Rep. Ron Estes (Kan.) and shared with Bloomberg Tax, would penalize foreign companies in the US if their home countries apply a DST, or small levies that tax digital activities such as ad sales and e-commerce, or other taxes. Several countries, such as the UK, Italy, and France have had the tax in place for years.

The proposal, filed this week, would make changes to Section 59A, the base erosion and anti-abuse tax, or BEAT. The tax places a 10.5% tax on certain deductible payments made by a multinational from the US to other jurisdictions. It’s meant to deter companies from shifting profits from the US to low-tax jurisdictions.

The bill also makes several company-friendly changes to the US’s minimum tax on foreign-earned income known as Net CFC Tested Income, or NCTI, to allow businesses to use more of their foreign tax credits.