Europe responds to US-imposed digital tax threats

The EU responded cautiously ahead of the G7 talks on Friday, after the US threatened to impose $2 billion of tariffs on six countries in response to their new digital taxes.

On Thursday, France clarified that it would not withdraw its digital tax until a new global levy on multinationals is agreed and implemented by the US.

“We should withdraw the (national) tax when there are new taxes in place” a French official said. “The tech companies have benefited during the (pandemic) crisis . . . We want to take (their) excess profit and that will be shared between the countries where the company is based and where its operations are.”

A Spanish budget ministry official highlighted the significance of reaching common ground with Washington rather than the threat of tariffs.

Talks between G7 countries will take place on Friday and Saturday in London to determine whether the world’s biggest economies can forge a common position on what form a global corporate tax system would take.

The EU ramping up its efforts ahead of the meeting comes shortly after Washington pressured other countries to establish a global deal on taxing multinationals by announcing retaliatory levies. The tariffs would target Austria, India, Italy, Spain, Turkey and the UK.

Meanwhile, the UK repeatedly refused to enter an agreement that will not give it the right to tax digital companies based in other countries.

A person close to the G7 negotiations stated that while a deal appears to be imminent, there is still some tension over which forum any agreement would be officially struck in.

US ambassadors around the world have been told to ramp up support for Washington’s plan by stressing US President Joe Biden sees it as a “top priority issue.”