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Washington has told the EU not to tax its tech giants. Brussels therefore plans to tax everyone instead.
The European Commission is considering a 0.3% tax on goods and services sold online by companies operating in the EU with annual turnover of € 50 million or more, informed officials told POLITICO plans. This makes the initiative more of a digital sales tax for all businesses, rather than one that targets only tech companies – a major concern for Washington.
The question of how to tax big tech companies has been a major source of transatlantic tension in recent years, with each side threatening to take tough action to back their point of view. Europeans have complained that tech giants are racking up big profits on their land but paying little into government coffers. Washington has pushed back efforts to target US tech giants, arguing it amounts to unfair discrimination.
Details of the Commission’s plans emerged after US President Joe Biden’s administration called on EU capitals to drop taxes on technology as part of a global deal to overhaul corporate taxation, agreed between 130 countries last week.
G20 countries should rubber stamp this deal this weekend – but Washington’s participation in the G20 deal depends on countries like France, Italy and Spain canceling their national tech taxes or similar initiatives. As far as Washington is concerned, this should also include the EU digital tax.
However, Commission officials are adamant that the EU tax as envisaged will not discriminate against US businesses or conflict with the G20 deal.
The Commission’s initiative, which is likely to change before its unveiling on July 20, would instead replace national taxes on digital services and help the EU finance its € 750 billion stimulus fund, officials say.
“The United States absolutely cannot oppose it, because the digital tax in this form clearly does not target American businesses,” said Socialist and Democratic lawmaker Paul Tang, who chairs the European Parliament’s tax subcommittee. . “The European Commission’s proposal is welcome in a period [when] online sales and profits have exploded.
Commissioners will likely make the same point next week when US Treasury Secretary Janet Yellen flies to Brussels. The former chairman of the US Federal Reserve has already had a phone call with the Commission’s digital chief, Margrethe Vestager, and is expected to meet individually with EU trade and tax tsars Valdis Dombrovskis and Paolo Gentiloni, Monday. She goes then address EU finance ministers on the same day.
There is no guarantee that Yellen will give his blessing, and U.S. Treasury officials have pushed EU diplomats to postpone the tax to avoid undermining this week’s G20 talks.
This pressure is having an impact in national capitals. The Commission needs the unanimous support of EU countries in the Council to adopt tax initiatives in law. If Yellen says “no,” it’s likely some EU capitals will too, officials said.
If Washington decides to withdraw from the global tax deal because of the new proposals from Brussels, it would be a blow to Europe’s crusade against tax evasion.
Call of Duty
Commission officials are adamant that the plans can be dealt with separately and that there is no intention to delay or abandon the new EU proposal.
EU leaders called on the Commission to propose the levy last year as part of a larger effort to raise new funds to help repay billions of euros for the country’s stimulus effort. block in the face of the coronavirus crisis.
“We are instructed by the European Council and the Parliament to table a proposal”, Economy Commissioner Gentiloni Told reporters on Wednesday when asked if he would heed US calls to delay the initiative. “We will avoid any interference and undermine… in relation to the global discussion.”
Senior US Treasury officials, who spoke on condition of anonymity, are aware of the Commission’s obligations, but insist the EU’s levy is inconsistent with the global deal worked out by the Cooperation Organization and economic development.
The Commission would be better off waiting for the OECD to finish drafting the fine print of the G20 deal in October, US officials said, without threatening retaliation if Brussels goes ahead. Biden’s predecessor Donald Trump used the tough tactics of threatening countries like France with trade tariffs on their tech taxes.
“Of course, we want to have the best possible cooperation with our American partners and friends,” Gentiloni added, sidestepping questions of a possible delay. “[The digital levy] will not create any form of discrimination and double taxation, so I do not see any risk of trade tensions because of this.
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