“This letter is a provocation,” French Finance Minister Bruno Le Maire stated, confirming receipt of this statement by US Treasury Secretary Steven Mnuchin.
France, Britain, Italy, and Spain have sent a response expressing their desire to agree on”a reasonable digital tax in the amount of the OECD as quickly as possible,” Le Maire said.
“We had been several centimetres away from an agreement on a tax for digital giants, who are possibly the only people in the world to have benefitted immensely from the coronavirus,” he told France Inter radio.
In January, 137 countries agreed to negotiate a deal on the best way best to tax tech multinationals by the end of 2020, under the auspices of the OECD.
Meanwhile, France in addition to Britain, Spain, Italy, and others have levied taxes on the biggest digital companies.
US officials also have slammed the moves as discriminating against American companies, and say any fresh levies should come only as part of a wider overhaul of global taxation rules.
Paolo Gentiloni, the EU commissioner for economic affairs, said on Thursday that he expected Washington’s decision to stop the discussions wouldn’t be permanent.
“I very much regret the US move to put the brakes on international talks on petrol of the digital economy. I expect this is going to be a temporary setback as opposed to a definitive stop,” he said in a statement.
‘Issue of justice’
Public pressure has been climbing on governments to hold tech firms more accountable for solutions that have profoundly reshaped societies and become integral elements of economic growth.
Critics say the largest companies have efficiently escaped meaningful taxation for many years by demonstrating their operations in tax havens, for example Ireland or Luxembourg in the EU.
Washington has threatened to retaliate against France’s taxation with tariffs on the equivalent of $2.4 billion (approximately Rs. 18,290 crores) of French products, though it kept off after Paris said it would freeze any collection during the OECD talks.
US Trade Representative Robert Lighthizer didn’t rule out a multilateral agreement when he appeared before the House of Representatives on Wednesday.
“I think there’s clearly room for a negotiated settlement,” he explained. “We need an international regime which not only focuses on certain sides and certain industries, but where we generally agree we’re going to tax people globally.”
“The European Commission wants a worldwide remedy to bring corporate taxation to the 21st century — and we believe the OECD’s two-pillar approach is the right one,” Gentiloni said.
The”columns” refer to both key issues at stake in the talks: the best way to taxation firms that governments do not tax currently though the company operates in their countries, and the way to ensure that every country gets a fair portion of a multinational’s earnings.
Gentiloni said in the absence of a bargain an EU-wide tax would be sought, but that is no certain thing given the bitter opposition of Ireland, which will be home to the EU headquarters for many US tech giants, including Facebook and Apple.
Tax affairs require unanimity among the EU’s 27 member states.
Le Maire vowed that if no deal is reached, France will proceed with its own tax in 2020.
“Whatever occurs, we will put on the tax on electronic giants in 2020, as it’s a matter of citizenship,” he said.