European countries give in to US digital tax demands: report

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In the deadlock between the United States and four European countries over taxing tech companies based on the size of their presence in each country, Europe flashed first. France, UK, Spain and Italy have proposed limiting the scope of their digital tax proposals after the US threatened to hit countries with tariffs if they went ahead with their taxes, Bloomberg News reported. The four countries have reportedly written a letter to U.S. Treasury Secretary Steve Mnuchin, proposing to implement a phased approach that initially only includes automated digital service companies. EU leaders continue to aim to reform the global digital tax regime during this year.

It’s a major concession that proves that Uncle Sam’s economic threats are working, at least on European nations. Last week, when the United States suspended negotiations with European countries over digital taxation and threatened them with economic retaliation, European leaders initially doubled their plans.

Not France’s first meeting with the United States

The French Minister of the Economy Bruno Le Maire had indeed qualified the suspension of these talks of “provocation” and affirmed that Paris would apply a tax on Big Tech “whatever happens”. In May, he said that France would impose a 3% digital tax on digital companies that have a turnover of more than 25 million euros in France and more than 750 million euros worldwide, which ‘Whether or not it is an international agreement on such a tax. progressed.

But this is not the first time that France has had to reverse its digital tax. In December 2019, the United States threatened to impose $ 2.4 billion in tariffs on French products, including champagne and cheese, as a retaliatory measure. As a result, France delayed its digital tax in January 2020 and the United States backed down. When the French Senate approved this tax in July 2019, it was to be a placeholder until the OECD reviewed cross-border tax rules via an international agreement, and Paris had even proposed to suspend its digital tax until the end. 2020. But the fallout from the COVID-19 pandemic has turned those plans upside down.

The British Treasury had also said it would proceed with its digital tax, even though it is engaged in trade negotiations with the United States. Britain’s 2% digital business tax, which is expected to generate £ 2bn in revenue, has moved to committee stage to be completed by June 25.

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The OECD had pushed back the deadline to flatten the deal from July 2020 to October 2020 due to the pandemic. In their response to Mnuchin, the four EU finance ministers wrote that the pandemic has increased the need for such levies, whether or not these multinational digital companies have a “physical” presence in countries, the BBC reported.

On June 2, U.S. Trade Representative Robert Lighthizer opened an investigation into digital services taxes that have been adopted or are under consideration by a number of U.S. trading partners. This investigation is conducted under Section 301 of the Trade Act of 1974 which gives the USTR the power to investigate and respond to actions of another country that may be unfair or discriminatory and adversely affect US trade. Countries under investigation include European countries as well as India, which put its 2% equalization tax into effect on April 1, 2020. From Lighthizer’s comments, it is clear that this was done on demand. of US President Donald Trump.

Read also : France will implement its 3% digital tax in the absence of a global tax treaty | The French Senate approves the 3% digital tax on Big Tech; MediaNama’s point of view | Foreign e-commerce companies will pay 2% equalization tax from April 1


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