Rich coun­tries clash over Big Tech tax talks

Jamaica Gleaner - - FINANCIAL GLEANER -

EURO­PEAN COUN­TRIES are slam­ming the Trump ad­min­is­tra­tion’s with­drawal from ne­go­ti­a­tions on a ma­jor dig­i­tal ser­vices tax. French Fi­nance Min­is­ter Bruno Le Maire, speak­ing on France In­ter, called it a “provo­ca­tion” and said France will still im­ple­ment the tax re­gard­less of the United States’ change of heart. Le Maire was re­fer­ring to a let­ter, first re­ported by the Fi­nan­cial Times, in which US Trea­sury Sec­re­tary Steven Mnuchin told the fi­nance min­is­ters of France, Spain, Italy and the United King­dom (UK), that he was sus­pend­ing talks on the tax. “This let­ter is a provo­ca­tion. It is a provo­ca­tion against all the part­ners at the OECD (the Or­gan­i­sa­tion for Eco­nomic Co-op­er­a­tion and Devel­op­ment) when we were cen­time­tres away from a deal on the tax­a­tion of dig­i­tal gi­ants,” Le Maire said. The coun­tries have been dis­cussing an in­ter­na­tional agree­ment on the way global taxes work. The tech tax is meant to pre­vent tax avoid­ance mea­sures by multi­na­tion­als, but the US has said it un­fairly sin­gles out com­pa­nies like Ama­zon and Google. Some coun­tries, such as Spain and Bri­tain, have been work­ing on their own dig­i­tal taxes while they wait for a global one. The head of the OECD, a group of wealthy na­tions, urged coun­tries to con­tinue work­ing on the global levy, warn­ing of the risks if more coun­tries de­cided to bring in their own dig­i­tal taxes. “This, in turn, would trig­ger tax dis­putes and, in­evitably, height­ened trade ten­sions,” said Sec­re­tary Gen­eral An­gel Gur­ria. “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.” In Europe, big tech firms such as Google and Face­book pay most of their taxes in the Euro­pean Union coun­tries where their reg­is­tered head­quar­ters are based, and of­ten pay very lit­tle in coun­tries where they run large and prof­itable op­er­a­tions. “The dig­i­tal tax is a ne­ces­sity of the 21st cen­tury. It’s not a whim or an ec­cen­tric­ity,” Span­ish Fi­nance Min­is­ter María Jesús Mon­tero told Spain’s Cadena SER ra­dio. “This is be­cause we have an ana­logue tax­a­tion sys­tem while we have a dig­i­tal so­ci­ety and a dig­i­tal econ­omy.” Le Maire said there was a joint re­sponse to the let­ter from the four coun­tries on Thurs­day. The French par­lia­ment ap­proved the ini­tial stages of a dig­i­tal tax law last year, but agreed to post­pone im­ple­men­ta­tion un­til De­cem­ber of this year in ex­change for the US hold­ing off on re­tal­ia­tory tar­iffs. A so-called ‘Google tax’ is also mak­ing its way through the Span­ish par­lia­ment, with an eye to­wards levy­ing it later this year. The Span­ish cab­i­net agreed in Fe­bru­ary to go ahead with its adop­tion, de­spite threats of re­tal­ia­tory tar­iffs by the Trump ad­min­is­tra­tion. Spain wants to place a 3 per cent tax on on­line ads, on deals bro­kered on dig­i­tal plat­forms, and on sales of user data by tech com­pa­nies that have a turnover of more than €750 mil­lion (US$842 mil­lion) a year in­ter­na­tion­ally and more than €3 mil­lion in Spain. It hopes to raise close to €1 bil­lion a year in ex­tra tax rev­enue. Bri­tain, which re­cently in­tro­duced its own dig­i­tal ser­vices tax, said it would keep push­ing for a global levy. “We have al­ways been clear that our pref­er­ence is for a global so­lu­tion to the tax chal­lenges posed by dig­i­tal­i­sa­tion, and we’ll con­tinue to work with our in­ter­na­tional part­ners to achieve that ob­jec­tive,” the Trea­sury depart­ment said in a state­ment. The UK’s 2 per cent dig­i­tal tax took ef­fect in April and ap­plies to search en­gines, so­cial me­dia ser­vices and on­line mar­ket­places earn­ing more than ₤500 mil­lion (US$624 mil­lion) in an­nual global rev­enue, in­clud­ing ₤25 mil­lion from Bri­tish users. The Trea­sury es­ti­mates it will even­tu­ally bring in an ex­tra ₤515 mil­lion a year.

AP

French Fi­nance Min­is­ter Bruno Le Maire.

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