US emerges from tech giants tax conference in Europe plans blow

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French Minister of Finance and the Economy Minister Bruno Le Maire (L) WELCOMES US Secretary of the State Treasury Steven Mnuchin.ERIC PIERMONT

The United States has shocked Europe by pulling out of negotiations on an international digital tax and has threatened retaliation if the region goes ahead with plans on its own.A number of European countries have been hoping to impose taxes on digital businesses above a certain income threshold, which strikes mainly US tech companies, given their size.

However, according to the Financial Times, in a letter to France, Italy, Spain and the UK, the US said international negotiations had reached a dead end and there was not even a room for a provisional agreement. The movement effectively puts an end to any possibility of dealing quickly.

An official working for one of the departments, who did not want to be appointed because of the sensitivity of the question, confirmed to CNBC Wednesday the existence of the letter, adding that a joint response is being prepared. France’s Finance Minister Bruno Le Maire told a radio station on Thursday that the US letter was a “provocation.” ”

“The United States does not want to continue negotiations on digital taxation at the OECD,” the Mayor said on Twitter. “I confirm that there will indeed be a tax on digital giants in France in 2020, in 2019,” he added.

The US and Europe have disagreed on taxing tech giants for some time. In early 2019, European governments failed to implement European-wide digital tax and took negotiations to the Organization for Economic Co-operation and Development seeking an international approach.

In the meantime, some European countries have decided to implement digital direct debits nevertheless. This was the case of France, which was the first major economy to do so.

However, the French move has sparked tensions with the United States, with US Trade Representative Robert Lighthizer arguing the new tax is unfair to American businesses. He said that the United States to impose customs duties on certain French products in response.

The two countries agreed in January to continue talks at the OECD level and proposed trade tariffs and digital taxes were put on hold.

The UK, Italy and Spain have, in the meantime, developed their own digital tax proposal in the case of the OECD, talks fail. The organization was due to submit a proposal later this year.

Independently of the OECD negotiations, the US announced earlier this month that it will investigate Austria, Brazil, the Czech Republic, the European Union, India, Indonesia , Italy, Spain, Turkey and the United Kingdom for the implementation, or to propose, of new taxes on the giant digital.

“I was expecting that, but not so soon,” David Livingston, a US analyst at the Eurasia Group, told CNBC on Wednesday.

“We are entering a world of realpolitik in the digital commerce space now. With the country’s largest – the United States – no longer taking part in multilateral governance discussions, and with the WTO essentially on the sidelines amid the search for its next Managing Director, WE will try to deter d ‘Other countries start from their plans through the threat of retaliatory measures,’ he added.

Meanwhile, Dan Neidle, tax partner at Clifford Chance, said in an email that “there is a real prospect of ending up in a trade war.” ”

“The only real thing about these taxes that goes well for them is that they don’t need the US deal, they are outside the scope of tax treaties. Otherwise, an amoral mess. But that’s almost certainly what’s going to happen now, ”Neidle said.

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