U.S. presses Europe to reconsider plans for new digital tax

The U.S. is pressing European officials to reconsider plans to enact a digital tax across its 27 members in a dispute that threatens to undermine significant progress made recently toward a global corporate tax agreement.

Ahead of this week’s meeting in Venice among finance ministers from the Group of 20 economies, U.S. Treasury Department officials indicated in a call with reporters Tuesday that a potential digital-tax proposal might fall afoul of a deal struck last week that aims to eliminate so-called digital service taxes. The U.S. believes such taxes discriminate against U.S. companies.

Treasury Secretary Janet Yellen was scheduled to speak Tuesday with Margrethe Vestager, the EU’s executive vice-president for digital issues, according to Vestager’s online calendar. Vestager was due to propose a new EU tax on technology companies’ revenues on July 20, a week later than planned, according to a document seen by Bloomberg News.

Thorsten Wagner/Bloomberg

In a deal brokered at the Organization for Economic Cooperation and Development, 130 countries and jurisdictions last week endorsed a plan to set a minimum rate for corporations along with rules to share the spoils from multinational firms. The latter portion is meant to deal with companies like Facebook Inc. and Amazon.com Inc., which garner much of their business through cross-border digital commerce. That agreement comes with a deal on repealing existing laws that attempt to tax cross-border digital sales.

Treasury officials on Tuesday’s call acknowledged that European officials are under political pressure to not abandon plans to tax tech giants. They said that while EU officials see the new measure as complying with the new agreement, the U.S. officials emphasized that it’s impossible to know if it complies until the full text of a broader accord is reached, which is targeted for October.

— With assistance from Isabel Gottlieb and Hamza Ali