EU open to prolonged digital tax talks to avoid trade war

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The European Union may delay digital tax proposals to give countries move time to hammer out a deal and avert a transatlantic trade war, a top official from the bloc said.

The European Commission had previously said it would table a proposal for digital taxation at the end of 2020 in the event of a failure of international talks hosted by the OECD. But disruption from the coronavirus and objections from the U.S. have delayed the process, making agreement before U.S. elections in November very unlikely, the commission’s director general for tax, Benjamin Angel, told a European Parliament hearing Monday.

“The difficult question that we must face collectively is when is the right moment to move with Plan B,” Angel said. “We will have to accept that the OECD process is not moving as quickly as we hoped while doing our best to support it.”

An easing of the EU threat may relieve some of the pressure on the tense negotiations. The U.S. last week announced 25% tariffs on a series of French goods worth about $1.3 billion in response to France’s national digital tax.

The U.S. levies will only be implemented in 180 days as France has temporarily suspended collecting its tax until the end of the year. That effectively puts all sides of the conflict in a holding pattern until after the U.S. ballot.

Speaking at the same hearing as Angel, the OECD’s director for tax policy, Pascal Saint-Amans, said that the election may not change the dynamics of the talks as both Democrats and Republicans have indicated objections to digital taxes. In the U.S., it’s seen as an attack on American companies, while in Europe it is seen as an attempt to get a fair share of tax, he said.

“There is literally a problem of reciprocal understanding that doesn’t make things easier,” Saint-Amans said.

Bloomberg News
International taxes European Union Tariffs OECD
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