Britain and France suggest step-by-step approach to global talks on digital taxation

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Britain, France, Italy and Spain suggested a “phased approach” to global talks on digital taxation in a joint letter to the US Treasury Secretary last week, which they said could open the way to an agreement this year.The four countries sent the letter, seen by Reuters, to secretary Steven Mnuchin after he called for a break from negotiations to update cross-border tax rules for the first time in a generation, which took place at the ‘Organization for Economic Cooperation and Development.

In the absence of a global agreement, Washington has threatened trade reprisals against European countries that are creating digital taxes as a way to increase revenues from local operations of large tech companies such as Alphabet’s Google and Facebook.

“We believe that a step-by-step approach, initially focused on automated digital services, … would make it possible to reach a political agreement at hand this year,” said Mnuchin’s European counterparts.

“It would also pave the way for possible transitional solutions to be discussed with the United States, particularly with regard to national taxes on existing or future digital services,” they added.

Fueling fears at the OECD of a new trade war, Washington has threatened to impose trade tariffs on champagne, handbags and other French products after Paris created its own tax on digital giants. last year.

Critics say businesses benefit enormously from local markets while making only limited contributions to public coffers, but Washington says taxes discriminate against American businesses and has opened commercial investigations into charges in several European countries.

The OECD said last month in an update on the progress of negotiations that a step-by-step process may be necessary, although a year-end deadline for an agreement remains possible.

© Thomson Reuters 2020

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