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EU Countries Ease Up on Digital Tax on US Tech Companies

EU Countries Ease Up on Digital Tax on US Tech Companies

Following several threats from the US to impose tariffs on certain European products, France, the UK, Italy and Spain have agreed to ease up on their planned taxation of US digital companies.

According to Bloomberg Law, these European member states “offered to limit the scope of a proposed global digital tax,” with the ultimate hopes of making it easier to “[achieve] a consensus-based solution and make a political agreement within reach this year.”

Following what the European jurisdictions labeled as “a phased approach,” the tax would only target at its outset companies that offer automated digital services.

Last week, the US announced it was dropping out of the OECD-led negotiations for a global solution to the taxation of digital companies.

OECD secretary general Angel Gurria warned that if a solution wasn’t reached, more countries would go ahead with unilateral digital services taxes, specially now that countries are in dire need of additional revenue as a result of the COVID-19 pandemic.

Gurria said in a statement: “Absent a multilateral solution, more countries will take unilateral measures and those that have them already may no longer continue to hold them back. This, in turn, would trigger tax disputes and, inevitably, heightened trade tensions.”

“A trade war, especially at this point in time, where the world economy is going through a historical downturn, would hurt the economy, jobs and confidence even further,” he concluded.

EU US trade war

However, this week, Pascal Saint-Amans, the head of the OECD’s tax division, said that the US had not dropped out and is still involved in the ongoing negotiations.

“The U.S. has not walked away from the negotiation, the U.S. has not pulled out,” Saint-Amans said.

Saint-Amans hopes a solution can be reached by the end of 2020 but might see parts of the project moved into 2021.

According to the OECD’s head of tax, negotiations on Pillar I are “near a solution, near the agreement” with the objective being “to have the basis for a deal.”

As for Pillar II, Bloomberg Tax explains, the negotiation “is further along because there aren’t political disagreements over the scope of the measure…but agreement on Pillar Two could still be slowed by countries that want it to be attached to Pillar One.”

In related news, earlier this week, the US threatened to impose tariffs on European olives, chocolates, gin and malt beer, among others, as part of an overall dispute regarding European subsidies offered to Airbus to the detriment of US company Boeing.

As reported by CNN, “the United States already levied 15% to 25% tariffs on $7.5 billion worth of other European goods as part of this dispute,” and “new items could be hit with tariffs of as much as 100%.”

In a statement, the EU said this latest move by the US “creates uncertainty for companies and inflicts unnecessary economic damage on both sides of the Atlantic.”

“This is particularly the case as companies are now trying to overcome the economic difficulties in the aftermath of the Covid-19 crisis,” it added.