This is from a USTR submission to the Canadian government on a proposed Canadian digital services tax:
Thank you to the Government of Canada for this opportunity to comment. The United States has serious concerns about the Canadian Government’s plan to enact a Digital Services Tax (DST).
The Canadian Government’s legislative proposal for a DST, as described in its Notice of Ways and Means Motion to introduce an Act to implement a Digital Services Tax, would implement a three-percent DST on revenue from certain digital services. The tax would apply to businesses with gross revenues of at least EUR 750 million (at least USD 850 million) and at least CAD 20 million (more than USD 15 million) of certain in-scope Canadian revenues. If implemented, the proposed DST would be payable with respect to revenues retroactively to January 1, 2022, despite the proposed entry into force date of “not earlier than January 1, 2024”.
...
As Canada is fully aware, the United States has serious concerns about measures that single out American firms for taxation while effectively excluding national firms engaged in similar lines of business. Based on previous communications from the Canadian Government and its officials, the United States understands that the Canadian DST proposal will duplicate most aspects of the DSTs adopted in France, Italy, Spain, Turkey, and the United Kingdom. The United States found these DSTs (and others) to be actionable under Section 301 of the United States Trade Act of 1974 and concluded that these DSTs are discriminatory and burden U.S. commerce. Any tax adopted by Canada would be assessed against the same standard.
The United States urges Canada to abandon any plans for a unilateral measure and instead redouble its commitment to the rapid implementation of Pillar One of the October 8 OECD/G20 agreement and the completion of a multilateral convention in 2022. We look forward to continued cooperation in our OECD/G20 efforts.
Based on this submission, it seems as though USTR is saying that the existence of a disparate impact on foreign companies is enough to violate the principle of non-discrimination under Section 301. The intent of the measure -- that is, whether it was taken for protectionist purposes -- doesn't seem to be part of this USTR analysis.
However, in past Section 301 cases on these same issues, USTR's reasoning did look at intent. For example, on the French digital services tax, USTR found:
The evidence collected in this investigation, including witness testimony, written comments, news reports, and expert commentary, indicates that the French DST is intended to, and by its structure and operation does, discriminate against U.S. digital companies. First, statements of French officials show that the DST is intended to target certain U.S. digital companies and not French companies. Second, the selection of the services covered by the tax, including carve-outs in the definition of such services, targets U.S. companies and not French companies. The DST’s revenue thresholds likewise target U.S. companies as opposed to French ones. Finally, the DST’s relationship to other taxes discriminates against U.S. companies.
Presumably, then, if USTR were to undertake a Section 301 investigation on the Canadian measure, it would try to present some evidence on intent (subjective or objective). I'm not sure what they would find in this regard, and it will be interesting to see what Canadian officials have been saying about the measure.
In addition, I would expect the Canadians to push back and explain that there is a clear non-protectionist purpose behind this measure and the target is not U.S. companies but rather large companies (or whatever the target is).
It's also worth noting in this regard that in the WTO context, USTR has argued that disparate impact is not enough.
