Donald Trump’s administration has halted global talks on how to tax digital giants such as Google, Amazon and Facebook after the discussions reached an ‘impasse’.
Treasury Secretary Steven Mnuchin told four of his European counterparts that talks on a global framework were being suspended – and warned of retaliation if Europe presses ahead with its own plans.
France today called Washington’s move a ‘provocation’ after confirming that it had received the letter.
The proposed deal is intended to make digital giants pay taxes according to their actual activity in each country, rather than shifting their profits to low-tax regimes such as Ireland or Luxembourg.
Mnuchin also took aim at the digital services taxes which some countries including Britain and France have imposed but which Washington sees as unfair to US firms.
Treasury Secretary Steven Mnuchin (pictured) has told four of his European counterparts that talks on a global framework for digital tax payments were being suspended
Donald Trump’s administration has halted global talks on how to tax digital giants such as Google and Facebook after discussions reached an ‘impasse’
A Treasury Department spokeswoman yesterday cited the coronavirus pandemic as a reason for breaking off the talks.
‘The United States has suggested a pause in the OECD talks on international taxation while governments around the world focus on responding to the [pandemic] and safely reopening their economies,’ said spokeswoman Monica Crowley.
Mnuchin had previously sent a letter to his counterparts in France, Britain, Spain and Italy informing them of the break.
According to the Financial Times, Mnuchin warned that the US would ‘respond with appropriate commensurate measures’ if countries go ahead with their own taxes.
France has enacted a tax on large digital firms of up to three per cent of their turnover as it stood on January 1, 2019, pending the adoption of global rules.
The UK is also adopting a digital services tax, while arguing that ‘the most sustainable long-term solution to the tax challenges arising from digitalisation is reform of the international corporate tax rules’.
French Finance Minister Bruno Le Maire today slammed the call fora break in negotiations as a ‘provocation’.
‘I confirm that we have received… a letter from US Treasury Secretary Steven Mnuchin confirming that they don’t want to pursue OECD talks on the digital tax,’ Le Maire told France Inter radio. ‘This letter is a provocation.
In January, 137 countries had agreed to reach a deal on the taxation of multinationals by the end of 2020 under the aegis of the OECD.
Facebook chief Mark Zuckerberg has previously signalled that the site is willing to pay more tax, acknowledging ‘frustration’ about how tech firms are taxed.
‘We want the OECD process to succeed so that we have a stable and reliable system going forward. And we accept that may mean we have to pay more tax and pay it in different places under a new framework,’ he said in February.
US trade representative Robert Lighthizer told the House of Representatives on Wednesday that the talks were ‘making no headway’.
However, he did not rule out a multilateral agreement, saying: ‘I think there’s clearly room for a negotiated settlement.
‘We need an international regime that not only focuses on certain sides and certain industries, but where we generally agree how we’re going to tax people internationally.’
Critics say the firms profit enormously from local markets while making only limited contributions to public coffers, which have been battered by the pandemic.
However, Washington views the taxes as discriminating against US corporate giants such as Alphabet, the parent company of Google.
Facebook chief Mark Zuckerberg (pictured) has previously signalled that the site is willing to pay more tax, acknowledging ‘frustration’ about how tech firms are taxed
Lighthizer this month launched investigations to determine whether digital services taxes being adopted or considered by Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey and Britain – amounted to unfair trade practices.
If it finds they do, the US government could impose new tariffs.
Washington previously initiated action against France for its digital services tax, but France later agreed to suspend the measure during international talks.
Spain insists the digital tax it is considering does not discriminate by country and will apply to companies regardless of where they are headquartered.
‘Spain believes it is necessary to adapt its fiscal system to the new economic reality of the 21st century,’ a government source said.
‘That was our position before receiving the letter, and continues to be so now.’
The Trump administration is embroiled in a separate row with tech giants over plans to strip them of legal immunity for what their users post online.
Trump announced the move last month in a clash with Twitter after it fact-checked two of his tweets which made controversial claims about mail-in voting.
Subsequently, Twitter partially censored the president’s inflammatory tweet about the Minneapolis protests in which he warned that ‘when the looting starts, the shooting starts’.