The United States is pressing European officials to reconsider plans to enact a new digital tax on its 27 members in a dispute that threatens to undermine recent significant progress toward a global corporate tax deal.
Ahead of this week’s Venice meeting between G20 finance ministers, US Treasury officials الخزانة EE.UU. In a call with reporters Tuesday, they noted that a potential digital tax proposal could conflict with an agreement reached last week aimed at scrapping it. Called taxes on digital services. The United States believes that these taxes discriminate against American companies.
Treasury officials acknowledged Tuesday that European officials are under political pressure not to drop plans to tax tech giants. They said that while EU officials see the new measure as compliant with the international agreement, US officials have stressed that it is impossible to know if it will be compliant until the full text of a broader agreement, which is due in October, is in place.
Treasury Secretary Janet Yellen is scheduled to speak with Margrethe Vestager, the European Union’s executive vice president for digital affairs, on Tuesday, according to Vestager’s online calendar. Vestager was due to propose a new EU tax on tech company income on July 20, a week later than planned, according to a document seen by Bloomberg News.
In a deal negotiated at the Organization for Economic Co-operation and Development, 130 countries and jurisdictions last week backed a plan to set a minimum corporate tax along with rules for sharing the spoils of multinational corporations. The last part is aimed at dealing with companies like Facebook Inc. and Amazon.com Inc. , which gets much of its business through cross-border digital commerce. The deal comes with an agreement to repeal existing laws, and block new ones, that attempt to tax cross-border digital sales.
At the press conference, Treasury officials also answered questions about how domestic politics in the United States represented an obstacle to the nascent global agreement. One official said that the part of the agreement that agrees to redistribute corporate taxes based on where companies do business, not just where they are headquartered, will require a multilateral treaty.
The US Constitution requires international treaties signed by the president to have a two-thirds majority for approval in the Senate, which can be a major challenge given that Democrats led by President Joe Biden only make up half of the House of Representatives.
Treasury officials said the US proposal that led to the tax redistribution deal was designed to attract lawmakers on both sides, avoiding focusing solely on digital companies or targeting US companies. The Treasury also stated that the US would not lose tax revenue on the deal.
After the OECD deal was announced last week, Kevin Brady of Texas, the ranking Republican on the House Ways and Means Committee, set the tone for his party’s response when he issued a statement on those that called the agreement “dangerous economic.” Give up.”
Separately, regarding the International Monetary Fund’s plans to create $650 billion in new reserves, Treasury officials said the United States supports alternative ways to channel so-called Special Drawing Rights to countries in need, including a proposal to create new credit.
The G-20 meeting is also expected to focus on renewed interest among wealthy nations on economic recovery from the Covid-19 pandemic, as well as efforts to further contain the virus.
One official said Yellen would urge other countries that it was not yet time to withdraw financial support for measures aimed at combating the virus and its economic impact.