US urges delay to EU digital tax plan

BRUSSELS: The United States is urgently requesting the EU delay a bloc-wide digital tax, warning it could torpedo international talks to overhaul global taxation, according to a US diplomatic document seen by AFP on Wednesday.

The argument has been made over recent days in a discreet but strongly argued diplomatic outreach by Washington to a handful of EU capitals, diplomats said on condition of anonymity.

The EU levy, due to be announced by the European Commission on July 14, "threatens the work being undertaken via the OECD/G20 process," said the US document.

"We urge you to work with the European Council and the European Commission" to delay its release, the document added, referring to the European institutions that will carry through the EU's plan.

Its timing "would risk entirely derailing the negotiations at a sensitive juncture," the US added.

Negotiations involving 139 countries are currently under way at the OECD in Paris to strike an important preliminary deal on global taxation in time for a meeting of G20 finance ministers in Venice on July 9.

Talks would then continue with hopes for a final deal later in the year.

Diplomatic sources told AFP the request by the US was delivered to ministries in several EU countries, including Germany, the Netherlands and Nordic countries, although authorities refused to confirm the lobbying effort on the record.

Along with Ireland, the countries approached by Washington were behind the demise of a previous plan for an EU digital tax that would have seen taxation increase for US tech giants.

Subsequent national digital taxes by France, Spain and others had drawn a fierce response from then-US president Donald Trump, who slapped trade tariffs on wine and other iconic EU products in response.

Countries are now negotiating a US-backed global minimum corporate tax of at least 15 percent along with a second provision that would allow nations to tax a share of the profits of the world's most profitable companies, regardless of where they are headquartered.

While not yet public, the European Commission insists its new levy plan would conform with whatever is agreed at the OECD and would hit thousands of companies, including European ones.

Money raised from the digital tax is intended to help pay for the bloc's 750-billion-euro ($890-billion) post-pandemic recovery plan.

The US said that, "while we appreciate the repeated public statements" on the matter, it viewed a delay as necessary to satisfy "important stakeholders" who would bristle at any "unilateral measure" by Europe.

In Washington, the US State Department and US Treasury Department declined to comment to AFP when asked about the request for a delay.

"The United States is focused on finding a multilateral solution to a range of key issues related to international taxation, including our concerns with digital services taxes," a State Department spokesperson said.

The US request comes just weeks after an EU-US summit in which US President Joe Biden and EU chiefs announced a reset of relations after four difficult years during the Trump presidency.

Both sides announced a five-year truce in a two-decade-old fight over Airbus and Boeing subsidies. But other tricky issues remain, including a refusal by the Biden administration to drop import tariffs on European steel and aluminium.