Great Britain

UK and Europe renew calls for global digital tax as US quits talks

Britain and European countries are continuing to push for a global digital tax on technology companies such as Google, Facebook and Amazon, despite the US pulling out of the negotiations this week.

The prospect of a digital services tax, which the UK hopes could bring in up to £400m annually for the exchequer, has been viewed as unfair by Washington, which has threatened retaliatory tariffs on products from British car exports to French champagne and cheese.

“We have always been clear that our preference is for a global solution to the tax challenges posed by digitalisation,” said a spokesman for the UK Treasury. “We will continue to work with our international partners to achieve that objective.”

Steven Mnuchin, the US Treasury secretary, withdrew from the talks with EU officials on Wednesday saying they had not made any progress.

Almost 140 countries are involved in the talks organised by the Organisation for Economic Cooperation and Development (OECD) to bring global tax rules into the digital era.

The aim had been to reach a deal by the end of the year, but the breakdown in talks, and forthcoming US presidential election, makes that timeline look increasingly unlikely.

Bruno Le Maire, the French finance minister, said France, Britain, Italy and Spain had jointly responded to the letter from Mnuchin pulling out of the talks.

“This letter is a provocation. It’s a provocation towards all the partners at the OECD when we were centimetres away from a deal on the taxation of digital giants,” Le Maire said in a radio interview on Thursday.

A spokesman for the Spanish government said European countries would not accept “any type of threat from another country” over attempts to introduce a digital services tax.

The US has resisted individual countries implementing their own digital tax in the absence of an OECD-led international deal.

In 2018, then UK chancellor Philip Hammond first raised the prospect of a digital services tax, saying it was designed it make sure “these global giants with profitable businesses in the UK pay their fair share”. Earlier this year, the chancellor, Rishi Sunak, gave the go-ahead for the tax.

It followed growing anger over the tiny sums of tax US technology companies pay in the UK, despite making billions of pounds of sales. Under the current system companies pay tax only on UK profits, and US tech firms have been accused of legally engineering their operations to report paltry profits.

The UK’s digital service tax would target online companies that make more than £500m revenue a year globally, with a levy charged at 2%.

The European commission said on Thursday that if no international deal could be struck this year then Europe would consider implementing its own digital services tax.

“The European commission wants a global solution to bring corporate taxation into the 21st century,” said Paolo Gentiloni, European commissioner for the economy. “But if that proves impossible this year, we have been clear that we will come forward with a new proposal at EU level.”

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