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Trade Enforcement Tools and International Taxation: A Digital Services Tax Case Study

Shay in this paper address Digital services tax (DST) from the lens of the US’ approach. He argues that although the US Section 301 trade actions against DSTs were strikingly effective in the short term, the provision is nonetheless ill-suited as a process for challenging taxes of other countries and lacks legitimacy. Shay argues that the sovereign power to tax is very broad and that there is no sufficient consensus on tax norms which may form the basis for unilateral action against DSTs. He argues further that the US Trade Representative’s tax policy analysis is weak and unpersuasive, and believes that the US’ application of Section 301 to contest taxes of other countries portends longer term consequences such as undermining efforts to achieve a stable and sustainable international tax system.

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Stephen E. Shay

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