Europe cautiously responds to U.S. digital tax threats

European countries reacted cautiously American threat US$2 billion in tariffs will be imposed on six countries in response to their new digital tax, which was carried out before Friday’s austerity talks on the issue.

On Wednesday, Washington increased pressure on other countries by announcing retaliatory taxation, demanding it reach an agreement on a global agreement to tax multinational companies, which was suspended for six months to allow time for an international agreement. Tariffs will target Austria, India, Italy, Spain, Turkey and the United Kingdom.

For the same reason, the United States has imposed but suspended tariffs on France.

Meetings between the finance ministers of the Group of Seven in London on Friday and Saturday will determine whether the world’s major economies can reach a consensus on the form of a global corporate tax system. This may affect the ongoing negotiations of the Paris OECD and the G20 meetings this summer and fall.

Paris made it clear on Thursday that it will not withdraw its digital tax until the United States agrees and implements a new global tax on multinational companies.

“We should withdraw [national] A French official said that taxes are levied when there are new taxes” to avoid tax interruption. “Technology companies benefit from the epidemic. [pandemic] crisis. .. We want to take [their] Excess profits will be shared between the country where the company is located and the country where it operates. “

The UK has repeatedly insisted that it will not sign any agreement that does not give it the right to tax digital companies in other countries.

But officials from the Spanish budget department emphasized common ground with Washington, not the threat of tariffs. “The fact that the United States has suspended tariff increases reflects its willingness to reach an agreement on international taxation,” the ministry official said.

London and Paris, which host the G7 negotiations, worry that the Biden administration will not be able to reach any agreement through Congress that gives other countries the right to tax a portion of the US technology giant’s global profits.

This presents a subtle sequencing challenge for the negotiators: until the new international system is in place, countries are unwilling to withdraw their taxes.

The proposed system will create a new right to tax the profits of the largest multinational companies based on their sales locations and set the global minimum effective corporate tax rate to 15%, which will raise a lot of money in the United States.

U.S. Trade Representative Katherine Tai said on Wednesday that the imposition of new tariffs and a six-month moratorium would give more time for international tax negotiations to continue and give Washington an opportunity to maintain the “option to impose tariffs.” … If there is a guarantee in the future”.

A person familiar with the negotiations told the Financial Times that U.S. ambassadors around the world were told to win support for Washington’s plan, and they emphasized that President Biden regarded it as a “first issue.”The representative of the United States told the opposing countries, “This is not a tax issue; this is about our [countries’] relationship”.

The person said that although the deal seems to be about to be concluded, there are still some tensions in the forum where the agreement is formally reached; Britain is “strongly pushing” to reach an agreement at the G7 summit in Cornwall next week.

However, other G7 members, including the United States, Italy, and Japan, are unwilling to further announce their common position, because the G20 is officially responsible for negotiations, and any transaction should not be considered to be resolved by large economies alone.

The G20 finance ministers and central bank governors are scheduled to meet in Venice in early July and may approve a global agreement at that time.

French Finance Minister Bruno Le Maire called on the G7 summit to support a global agreement and said that the agreement is “at your fingertips.” “This is a question of fiscal justice and economic efficiency,” he said.

Reported by Chris Giles in London, Emma Agyemang in Copenhagen, Aime Williams in Washington, Daniel Dombey in Madrid and Victor Mallet in Paris

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