Digital tax law stand-off between US and EU set to escalate

The US government has consistently rebuffed efforts by any country to tax the big tech companies like Amazon, Google, Facebook and Alphabet. Governments in France, Italy and the United Kingdom have all passed digital tax rules that aim to collect hundreds of millions in revenue from tech giants.

But the US opted out of fraught international tax negotiations with European countries in June 2020.The EU termed it as a provocative move.“I very much regret the U.S. move to put the brakes on international talks on taxation of the digital economy,” said Paolo Gentiloni, the European economic commissioner. “If a global solution isn’t reachable this year, we will come forward with a new proposal at E.U. level,” he added.

The new Treasury Secretary Janet Yellen’s ascension to the post has been hailed by diplomats in Europe and elsewhere who are hopeful of a more conciliatory tone.

France Digital Service Tax Reforms

France is of the opinion that by 2021 there should be a uniform digital tax adopted across the EU.

But there are constitutional and regulatory impediments to anything happening quickly as the Organization for Economic Cooperation and Development (OECD) wants. The economic international body wants a quick solution by this summer. But the lawmakers have to approve of any new legislation that involves changing the US tax code. And under US law, opening the tax code opens up all US tax law for amendment. Incorporating a new global tax agreement into US law will be arduous as it is not possible to limit its scope and pass a small bill.

Another hindrance is no lawmaker is ready to raise taxes that will mean the constituents will have to finally pay for it. And including an international law into the country’s code is fraught with pitfalls.

Additionally, the big corporates will not be happy too, and will lobby against it as a new digital sales tax law means all of them having to shell out money to operate in different countries. Considering how much effort is made by the big techs to float entities in liberal tax countries to avoid paying taxes, this law is not going to pass soon.

The European Commission has said it would revive plans for a bloc-wide tax if the U.S. withdrawal from OECD talks killed off the prospect of a global reform.

“There’s a real prospect we end up with a trade war,” said Dan Neidle, a tax partner at Clifford Chance, a law firm in London.

Avatar
Anna Domanska
Anna Domanska is an Industry Leaders Magazine author possessing wide-range of knowledge for Business News. She is an avid reader and writer of Business and CEO Magazines and a rigorous follower of Business Leaders.

Recent Posts

Hyundai commits $7.4 billion in US investment by 2025

Hyundai commits $7.4 billion in US investment by 2025

South Korea’s Hyundai Motor Co., announced on Thursday it will soon start manufacturing electric vehicles in the United States. The automaker plans to produce EVs, upgrade produc
2 days ago
US inflation report of 4.2 percent raises concerns

US inflation report of 4.2 percent raises concerns

The US reported the highest inflation recorded in the last dozen years at 4.2 percent in April, riding on government stimulus packages, improved energy prices, better spending and
2 days ago
Aon – Willis asset disposal aims to ease approval of $30 billion merger

Aon – Willis asset disposal aims to ease approval of $30 billion merger

Aon Plc and Willis Towers Watson have agreed to sell $3.6 billion worth of assets to rival Arthur J. Gallagher & Co. in a bid to appease European competition regulators over th
3 days ago
Roblox declares Q1, reports $387 million revenue as bookings increase

Roblox declares Q1, reports $387 million revenue as bookings increase

Roblox, the hugely popular online gaming platform, reported its first-quarter earnings after becoming a listed company. Its revenue more than doubled as the videogame company benef
4 days ago
Weak US job report results in volatile market

Weak US job report results in volatile market

A weak job report resulted in a record close on Friday for the US stocks. The US labor department’s monthly non-farm payrolls report revealed employers hired 266,000 new workers
5 days ago
Star and Blackstone launch bids to buyout Australia’s Crown Resorts

Star and Blackstone launch bids to buyout Australia’s Crown Resorts

A bidding war has broken out between Australian casino company Star Entertainment Group and US private equity investor Blackstone Group over Crown Resorts, Australia’s bigges
5 days ago