France has accused the United States of trying to undermine international negotiations on updating the cross-border taxation regime; Paris has urged the EU to prepare for an EU tax as a fallback option if negotiations fails.
Nearly 140 countries are negotiating the first major rewrite of the international tax framework to account for the rise of big digital companies, including Apple, Google and Amazon.
A blueprint for a deal is scheduled to be released by the Organisation for Economic Cooperation and Development (OECD) next month, with the aim of reaching an agreement by December 31, 2020; a deadline that is becoming increasingly challenging to meet.
The U.S. had called for a pause to the negotiations earlier this year suggesting that any deal should include a voluntary opt-in mechanism for U.S. companies; it had also raised qualms about the scope of the tax.
“It’s very clear, the United States don’t want a digital tax (deal) at the OECD. So they are making obstacles that prevent us from reaching an agreement even though the technical work is done,” said French Finance Minister Bruno Le Maire.
The rise of big digital service companies have riled finance ministers around the globe since they routinely are able to earn huge revenues in other countries while booking profits in other countries, such as Ireland.
In the absence of a global deal, a few European countries have followed France’s leadership in creating its own national digital services tax regime; this however has made France’s a target of U.S. retaliatory tariffs.
Undaunted by the U.S. threat, Le Maire has renewed calls for EU-wide digital tax regime, in the absence of an international agreement.
“If the U.S. blockage is confirmed by year end, we are counting on the European Union to make a formal proposal to tax digital activities in the first quarter of 2021,” Le Maire.
He went on to add, he had full confidence that Irish Finance Minister Paschal Donohue would live up to a promise to support such a tax proposal, despite Dublin’s previous attempts to shoot it down at the EU level.