The European Commission plans to put forward a proposal for a digital tax if international efforts fail this year after the withdrawal of the US, ignoring Washington’s threats if Europe moves ahead.
The US Administration sent a letter first reported by the Financial Times to France, Italy, Spain and the UK informing them that Washington will withdraw from the Organisation of Economic Co-operation and Development-led efforts to agree on a new tax on digital services provided by companies like Google, Facebook and Amazon.
Critics say the big firms set to be hit with the tax profit enormously from local markets while making only limited contributions to public coffers.
Washington also threatened again retaliatory action against those countries that impose a digital tax, described by the US Administration as “discriminatory”.
Europe regrets the US decision to “put the brakes on the international talks”, said European Commissioner for Economy Paolo Gentiloni on Thursday (18 June). He hoped this decision was “a temporary setback rather than a definitive stop”.
Gentiloni added that Europe remains committed to finding an agreement at OECD level.
“But if that proves impossible this year, we have been clear that we will come forward with a new proposal at EU level,” he said.
France, Italy, Spain and the UK also expressed a similar position in January, when the US and the European countries clashed over the digital levy.
These countries, and other European nations, are planning to introduce national digital taxes even before an EU proposal is on the table.
Asked during an interview on Cadena SER radio about the so-called “Google Tax”, Spanish Minister of Finance Maria Jesus Montero said, “Neither Spain, nor France, nor Italy, nor Britain, no country will accept any type of threat from another country.”
“We are not legislating to damage the interest of other countries,” Montero continued. “We are legislating so that our tax system is orderly, fair and adapted to current circumstances.”
US Treasury spokeswoman Monica Crowley said Washington had proposed pausing – not ending – talks among OECD countries.
“The United States has suggested a pause in the OECD talks on international taxation while governments around the world focus on responding to the COVID-19 pandemic and safely reopening their economies,” she said.
A source briefed on the letter said Washington still felt an agreement was possible this year.
US Trade representative Robert Lighthizer launched this month investigations to determine whether digital services taxes being adopted or considered by 10 parties – Austria, Brazil, the Czech Republic, the EU, India, Indonesia, Italy, Spain, Turkey and Britain – amounted to unfair trade practices.
If his inquest finds that they do, then the US government could impose new tariffs.
Washington previously initiated action against France for its digital services tax, but Paris later agreed to suspend the measure while the OECD worked out a standardised approach.
[Edited by Sam Morgan]