Despite the US threats of imposing new tariffs, France, Italy, Spain and the UK said on Wednesday (22 January) they would move ahead with their national digital tax if there is no agreement at the OECD level by the end of this year.
The digital tax is one of the ‘hot issues’ at the World Economic Forum in Davos (Switzerland) this week.
A last-minute conversation between French President Emmanuel Macron and US President, Donald Trump helped to avoid an escalation in the transatlantic trade war.
Paris agreed to suspend the collection of its tax on Google, Facebook and the like until the end of the year. In return, the Trump administration will not move ahead with imposing further tariffs on French products worth $2.4billion.
But France said it will collect all the taxes retrospectively early next year if the OECD fails to reach a deal on a digital tax.
“We need to have a credible solution at the international level to avoid national solutions by European countries,” French Finance Minister Bruno Le Maire told reporters at the Davos forum.
The OECD has been working over the past months on a proposal to address the profit-shifting of some multinationals to avoid paying taxes. Digital companies’ tax bills are among the lowest due to aggressive tax planning and the nature of their business.
Le Maire told reporters that he has been in contact over the past days in Davos with his colleagues the Spanish and the Italian minister, Nadia Calviño and Roberto Gualtieri, and the chancellor of the Exchequer Sajid Javid.
“We all have the same view”, Le Maire said. “If there is a credible solution at the OECD, there is no need for a national one, he said.
Speaking to EURACTIV.com, Gualtieri supported Le Maire’s plan. He explained that the Italian tax is designed in such a manner that the payments are due the following year, with a sunset clause that would kill the national model as soon as the OECD version is in place.
“We are strongly engaged in finding a solution at the global level. Of course, if no solution is found at that level by the end of the year, we will keep implementing our national measure”.
Gualtieri also hoped that there would be a “common solution” at the EU level
Calviño said that unless there is “satisfactory progress” at the OECD level this year, European countries are “determined” to push for an EU solution. But she added that in parallel, Spain would progress toward the approval of a national tax. If neither the OECD nor the EU options are adopted “in the short term”, Spain would not drop its national plans.
Javid told a panel discussion in Davos that the UK planned to go ahead with its digital service tax in April. He added that it would be temporary and would “fall away once there is an international solution”.
The determination of European countries came despite the renewed threats by Washington to retaliate if the Europeans moved forward with their national digital taxes.
Speaking alongside Javid at the same panel, US secretary of Treasure, Steve Mnuchin, insisted that the French digital tax and alike are “discriminatory in nature”.
“If people want to just arbitrarily put taxes on our digital companies, we will consider arbitrarily putting taxes on car companies,” he added.
The likelihood of the agreement will depend on how the OECD squares the circle, combining Europe’s insistence on a “credible solution” and the US’s defence of a voluntary digital tax.
The OECD secretary-general Ángel Gurría will meet on Thursday with Le Maire and Mnuchin to find some middle ground.
“There is still some work to be done to agree on the basis to launch the work at the OECD,” Le Maire admitted.
Calviño hoped that the OECD would put forward a “good proposal” by the end of this month, that would lead to a political agreement at the G20 in June, and the adoption of the international plan in the second half of the year.
Despite the differences between the US and France, Le Maire was relatively confident that a solution could be found, given the “common understanding to de-escalate” the dispute between Macron and Trump, the “excellent” personal relationship with Mnuchin and the “very hard” work done by the OECD since August at the technical level.
[Edited by Zoran Radosavljevic]