U.S., European Nations Claim Progress on Path to Removing Digital Taxes

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France’s finance minister says five European countries have agreed on how they will remove digital taxes once the global agreement goes into effect

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“This is good news,” Mr Le Maire told reporters. “We came to an agreement during these two days in Washington on how to get those taxes back”.

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US Treasury Department spokeswoman Alexandra Lamanna confirmed the deal and said more details were expected in the coming days.

“This agreement should end tax and trade disputes with our European allies that can hinder economic growth and business investment, and prevent unilateral measures to pave the way for the implementation of the 136-nation agreement,” he said.

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Much of the US focus last week in the 136-nation tax deal was focused on the global minimum tax, which is a priority for Treasury Secretary Janet Yellen and the Biden administration.

But other countries, including France, the UK and Italy, have focused on the other half of the deal, which gives countries greater ability to impose their corporate income taxes on companies that sell to their customers without a significant physical presence. This is partly for the purpose of raising taxes, such as Facebook. Inc.

and alphabet Inc.

Pay outside the US

Countries are imposing digital taxes outside corporate income tax as a way to tax those companies. The deal struck last week will expand the tax powers of countries based on the size of their consumer markets, even if they are not typical profit centers or corporate headquarters. In return, countries would have to waive their digital taxes.

The US, through both the Trump and Biden administrations, has opposed other countries’ digital taxes aimed at unfair and discriminatory methods for an industry dominated by American companies. It has imposed retaliatory charges but suspended enforcement as negotiations continue.

US officials have pushed for the removal of digital taxes as part of a broader agreement to control which countries tax which companies’ profits. The challenge is to find out when this happens.

The US has urged an early removal of taxes, but European countries have opposed it. Statements from France and the US on Thursday did not provide full clarity on exactly what would happen, although Mr Le Maire reiterated that France will not remove its digital tax until the new tax is implemented.

Italian Finance Minister Daniele Franco, who was speaking for the presidency of the G-20, suggested not too much movement too soon.

“by the end of 2023 or the beginning of 2024” [rules] There will be current, and the agreement is that, at that time, national taxes will be removed,” said Mr Franco. “From the beginning, it has been established that taxes will be removed when a worldwide solution is implemented. So we expect national, unilateral taxes to be removed by 2024.”

The resolution of tensions between France and the Biden administration will not necessarily create bipartisan goodwill.

“Countries with DST must demonstrate their good faith and suspend tax collection when the OECD process is complete,” Rep. Kevin Brady (R., Texas), the top Republican on the House Ways and Means Committee, said earlier this week. I said.

Business groups are also pushing for faster removal.

One challenge America is staring at stems from the system that would replace digital taxes. The new rules would allow countries to partially apply their corporate income taxes to companies where customers are located, not just where corporate value is created.

This is a change sought by countries such as the UK, Italy and Spain, which have been disappointed to see technology giants profiting from their citizens without paying significant corporate income taxes.

The international agreement calls for a multilateral framework to implement changes that would affect the network of tax treaties and other rules that have governed the international tax system for decades. The power to impose taxes on the largest multinationals will be replaced by a new formula.

Such a deal would need to go through the US Congress, and Republicans argue that it would require a treaty and thus two-thirds approval in the Senate. This would require the support of at least 17 Republicans in the current coalition. Other countries are well aware of the potential obstacles the Biden administration will face in securing those votes.

In a letter last week, three senior Senate Republicans said they were concerned by recent suggestions that the administration thought it could implement changes without changing tax treaties that were approved by two-thirds of the Senate.

“By bypassing this process to override our bilateral tax treaties would irreparably destroy the exclusive treaty authority granted to the Senate by the Constitution,” wrote Republican Sense, Jim Risk and Mike Crapo of Idaho and of Pennsylvania. Written by Pat Tommy.

The Biden administration has been more circumspect about the legislative path ahead, hinting that there may be ways to implement the agreement without a truce. No action is expected on this in the US until next year.

Daniel Boone, vice president of global projects at the Tax Foundation, a Washington group, said that removing the digital-tax could help the administration push the plan through Congress by giving Republicans a reason to withdraw the deal to adopt the multilateral deal. Is. Generally favors simpler taxes with lower rates.

But Republicans, he said, would also be concerned about how much of the US tax base they would cover in the comprehensive agreement.

Netherlands Taxation Minister Hans Wijlbreif, who does not have a digital tax, said other countries are aware that changes in dividing tax authority are among the most politically challenging for the US and is looking at the legislative process.

“It’s not that we don’t trust Capitol Hill, but there are other interests there too,” Mr Wijlebrief said in an interview on Wednesday. “I would say America is good for its word. If they promise they will do it, I take it as a position that they will.”

write to Richard Rubin [email protected] . Feather


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