The Treasury Department issued a strongly worded statement Friday in response to a report from the Organization for Economic Cooperation and Development on taxation of the digital economy.

“The U.S. firmly opposes proposals by any country to single out digital companies,” said Treasury Secretary Steven Mnuchin. “Some of these companies are among the greatest contributors to U.S. job creation and economic growth. Imposing new and redundant tax burdens would inhibit growth and ultimately harm workers and consumers. I fully support international cooperation to address broader tax challenges arising from the modern economy and to put the international tax system on a more sustainable footing.”

The report is part of the OECD’s action plan for responding to base erosion and profit shifting by multinational companies, also known as OECD BEPS. More than 110 countries and jurisdictions have agreed to review two key concepts of the international tax system, the OECD said Friday in unveiling the report, responding to a mandate from the G20 Finance Ministers to work on the implications of digitalization for taxation.

The members of the OECD/G20 Inclusive Framework on BEPS plan to work towards a consensus-based solution by 2020, as described in the Interim Report on the Tax Challenges Arising from Digitalisation they released Friday. The interim report will be presented by OECD Secretary-General Angel Gurría to the G20 Finance Ministers at a meeting next week in Buenos Aires, Argentina.

Building on the 2015 BEPS Action 1 Report, the interim report analyzes the changes to business models and value creation from digitalization, and describes the potential implications for international tax rules. The report also identifies the positions held by various countries, and the approaches and solutions they are using or contemplating. The approaches range from countries that consider no action is needed, to those that consider there is a need for action, while others consider that any changes should apply to the economy more broadly. The report aims to lay a foundation for a long-term multilateral solution in the fuure.

“The international community has taken an important step today towards resolving the tax challenges posed by the digitalization of the economy,” Gurría said in a statement. “We have underlined the complexity of the issues, and highlighted the importance of reaching international agreement, both for our economies and the future of the rules-based system. The OECD stands ready to accompany countries as they seek to build a common understanding of the issues related to the digital economy and taxation, as well as the long-term solutions.”

However, some of the approaches in the report would likely clash with the recent tax overhaul law that Mnuchin and other members of the Trump administration spearheaded with Republican members of Congress. The Tax Cuts and Jobs Act provides incentives for U.S.-based multinational companies to repatriate their foreign profits back to the U.S. Many companies, particularly in the technology and pharmaceutical industries, were able to use low-tax countries as a way to reduce their corporate taxes by shifting intellectual property and official domiciles abroad. The new tax law includes a Base Erosion and Anti-Abuse Tax provision, also known as BEAT, to deter companies from such practices in the future.

Treasury Secretary Steven Mnuchin
Treasury Secretary Steven Mnuchin Bloomberg News

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Michael Cohn

Michael Cohn

Michael Cohn, editor-in-chief of AccountingToday.com, has been covering business and technology for a variety of publications since 1985.