US Secretary of the Treasury Mnuchin (L) and Frances Finance Minister Le Maire (Reuters photo)
The United Kingdom, France, Italy and Spain have criticized the US over its decision to pull out of negotiations on a global digital services tax, an idea proposed by the Organization of Economic Co-operation and Development (OECD).
On Wednesday, US Trade Representative Robert Lighthizer said that negotiations with European Union officials over the issue had made no progress.
The United States views the taxes as discriminating against US firms since the American digital services companies are the biggest in the world.
Now, the impasse could set off an escalating trade war and prompt President Donald Trump to retaliate against countries that impose taxes on American tech firms like Amazon, Facebook and Google.
The stalemate could also cause considerable uncertainty for multinational corporations over their future tax bills at a time when the coronavirus pandemic has upended supply chains and business models globally.
Last week, the Financial Times reported that US treasury secretary Steve Mnuchin had written a letter to British Chancellor Rishi Sunak as well as the foreign ministers of France, Italy and Spain, notifying them of suspension of the talks.
In the letter dated June 12, Mnuchin again threatened them with retaliatory action.
"As we have repeatedly said, if countries choose to collect or adopt such taxes, the United States will respond with appropriate commensurate measures," wrote Mnuchin.
Treasury spokeswoman Monica Crowley, however, said the US had suggested pausing the talks not ending them, "while governments around the world focus on responding to the COVID-19 pandemic and safely reopening their economies."
On Thursday, Frances Finance Minister Bruno Le Maire said Paris will apply such a levy this year despite US objections, noting the respective countries had jointly responded to Mnuchins letter.
"This letter is a provocation. Its 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 on France Inter radio.
Mnuchin has said that there was no chance of even a temporary tax.
During a hearing of the House Ways and Means Committee on Wednesday, Lighthizer said, "We were making no headway and the Secretary made the decision that rather than have them go off on their own, you would just say were no longer involved in the negotiations."
Two weeks ago, he began investigations into whether or not digital services taxes being considered by Austria, Brazil, the Czech Republic, the EU, India, Indonesia, Italy, Spain, Turkey and UK were unfair trade practices.
Paris once tried to go it alone with a digital services tax, but it was threatened with 100% retaliatory tariffs on wine and handbags that made it back off.
Spain, on the other hand, asserts its digital tax does not discriminate by country and that it will apply to firms regardless of where they are headquartered.
"Spain believes its necessary to adapt its fiscal system to the new economic reality of the 21st century; that was our position before receiving the letter, and continues to be so now," a government source told Reuters.
SOURCE: PRESS TV
LINK: https://www.ansarpress.com/english/18668
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