Washington, Dec 5 (IANS) US Treasury Secretary Steven Mnuchin on Wednesday urged countries to “suspend” their individual digital services taxes and to wait for an international taxation agreement on the matter to be negotiated by the Organisation for Economic Cooperation and Development (OECD).
“We urge all countries to suspend digital services tax initiatives in order to allow the OECD to successfully reach a multilateral agreement,” said Mnuchin in a letter to OECD Secretary-General Angel Gurria, dated Tuesday.
He said that the US opposes taxes on digital services, popularly known as the “Google tax,” since they have a “discriminatory” impact on big tech firms based in the US, Efe news reported.
“We believe that it is very important that these talks reach agreement in order to prevent the proliferation of unilateral measures, like digital services taxes, which threaten the longstanding multilateral consensus on international taxation,” Mnuchin added in his letter to Gurria.
Gurria on Wednesday proposed in a letter to Mnuchin that he come to Paris, preferably before Christmas, to discuss the matter with him and with French Finance Minister Bruno Le Maire.
Mnuchin’s letter comes two days after President Donald Trump announced that he will impose tariffs of up to 100 percent on certain French imports – amounting to some $2.4 billion – after France implemented a 3 percent tax on big tech firms’ income from online services.
The tax affects firms such as Google, Apple, Amazon, Facebook and several dozen others that have annual revenues greater than 750 million euros ($845 million). Most of the firms affected by the tax are US-based, but Chinese, British and German companies will also be impacted by the tax.
After the implementation of the French tax, US Trade Representative Robert Lighthizer – who heads the agency responsible for US foreign trade policy – issued a report lambasting the French tax as discriminatory and specifically targeting big US tech firms.
He also said that the Trump administration would impose tariffs on a wide array of French products, including champagne, cosmetics, yogurt and various kinds of cheese.
The decision “sends a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on US companies,” Lighthizer said Monday in a statement on the matter.
The USTR said it will consider broadening its investigation to include similar taxes imposed by Austria, Italy and Turkey.
The OECD in October released a report in which it proposes that big corporations pay taxes where their users are located, rather than in the country where they are based.
According to this proposal, big tech firms like Google, Apple, Amazon and others would pay part of their taxes in the markets where their revenue is generated.
Those firms and many others have been criticized in the past for locating their home offices in countries where they have a favourable tax situation, thus reducing the potential taxes they might pay in other countries where they make much of their income.