The US has suspended talks with European countries on plans for
a global framework for the taxation of digital services, after the discussions
reached an ‘impasse’. The US Treasury Secretary Steven Mnuchin has informed EU
finance ministers that the US was unable to reach agreement, even on an interim
basis, on grounds that US tech companies would be disproportionately affected
and in light of current government priorities in dealing with coronavirus. As
widely reported, the US opposes unilateral measures to introduce digital
services taxes. Secretary Mnuchin’s letter calls for the suspension of pillar one
talks (taxing rights, profit allocation and nexus rules) with a view to
resuming ‘later this year’. On pillar two discussions, on a global minimum
level of tax, the US ‘fully supports bringing those negotiations to a
successful conclusion this year’.
Reacting to the news, Ben Jones, head of the London tax group
at Eversheds Sutherland, noted the US position was no great surprise, given its
long-running concern that digital tax reform ‘disproportionately prejudices
American businesses and the growing implementation of unilateral digital tax
measures – such as digital services taxes in France and the UK – have added
recent fuel to these fears’ with the US government starting to look at unfair
trade practice investigations and threatening trade tariffs.
Looking at the wider picture, Jones notes ‘it is possible that
stepping back from the wider negotiations is a further weapon in the US arsenal
to specifically target these unilateral measures. It is understood that the US
government and many potentially impacted US businesses do want an appropriate
consensus-based international agreement on digital tax reform, rather than a
global plethora of unilateral digital taxes, and this move could be another
step to force that agenda. In the meantime, for businesses engaged in the
digital economy, the uncertainty about the future tax landscape continues and
now seems likely to do so for even longer.’
Writing to the OECD, the US had previously urged other
countries ‘to suspend digital services tax initiatives, in order to allow the
OECD to successfully reach a multilateral agreement’. OECD Secretary-General,
Angel Gurria, has said that all members of the Inclusive Framework should
remain engaged in negotiations towards the goal of reaching a global solution
by year end, drawing on all the technical work that has been done during the
last three years, including throughout the coronavirus crisis. Gurria noted
that, in the absence of a multilateral solution, more countries will take
unilateral measures and those that have them already may no longer continue to
hold them back, potentially triggering tax disputes and heightening trade
tensions. He added that a multilateral solution based on the work of the 137
members of the Inclusive Framework is ‘clearly the best way forward’.
The US has suspended talks with European countries on plans for
a global framework for the taxation of digital services, after the discussions
reached an ‘impasse’. The US Treasury Secretary Steven Mnuchin has informed EU
finance ministers that the US was unable to reach agreement, even on an interim
basis, on grounds that US tech companies would be disproportionately affected
and in light of current government priorities in dealing with coronavirus. As
widely reported, the US opposes unilateral measures to introduce digital
services taxes. Secretary Mnuchin’s letter calls for the suspension of pillar one
talks (taxing rights, profit allocation and nexus rules) with a view to
resuming ‘later this year’. On pillar two discussions, on a global minimum
level of tax, the US ‘fully supports bringing those negotiations to a
successful conclusion this year’.
Reacting to the news, Ben Jones, head of the London tax group
at Eversheds Sutherland, noted the US position was no great surprise, given its
long-running concern that digital tax reform ‘disproportionately prejudices
American businesses and the growing implementation of unilateral digital tax
measures – such as digital services taxes in France and the UK – have added
recent fuel to these fears’ with the US government starting to look at unfair
trade practice investigations and threatening trade tariffs.
Looking at the wider picture, Jones notes ‘it is possible that
stepping back from the wider negotiations is a further weapon in the US arsenal
to specifically target these unilateral measures. It is understood that the US
government and many potentially impacted US businesses do want an appropriate
consensus-based international agreement on digital tax reform, rather than a
global plethora of unilateral digital taxes, and this move could be another
step to force that agenda. In the meantime, for businesses engaged in the
digital economy, the uncertainty about the future tax landscape continues and
now seems likely to do so for even longer.’
Writing to the OECD, the US had previously urged other
countries ‘to suspend digital services tax initiatives, in order to allow the
OECD to successfully reach a multilateral agreement’. OECD Secretary-General,
Angel Gurria, has said that all members of the Inclusive Framework should
remain engaged in negotiations towards the goal of reaching a global solution
by year end, drawing on all the technical work that has been done during the
last three years, including throughout the coronavirus crisis. Gurria noted
that, in the absence of a multilateral solution, more countries will take
unilateral measures and those that have them already may no longer continue to
hold them back, potentially triggering tax disputes and heightening trade
tensions. He added that a multilateral solution based on the work of the 137
members of the Inclusive Framework is ‘clearly the best way forward’.
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