The proposed digital tax could do away with some progress made toward a global agreement for a corporate tax, according to Bloomberg. It might ruin a deal from last week, which would do away with such digital service taxes. The U.S. thinks these taxes discriminate against U.S.-based companies.
European officials are under pressure politically to tax tech giants, Bloomberg reported. While the new measure might comply with the international agreement, the U.S. said it won’t be able to calculate how everything will work until a larger arrangement is set, which will not happen until October.
There was a deal made at the Organization for Economic Cooperation and Development, where 130 countries last week agreed to set a new minimum rate for companies like Facebook and Amazon, which garner business often through cross-border digital commerce, according to Bloomberg. That agreement also came with a deal to repeal laws already on the books that tax cross-border digital sales.
Another issue with the deal regards the redistribution of corporate taxes based on where business is done, which Treasury officials said would need a multilateral treaty. The U.S. constitution makes it so that international treaties struck by presidents need a two-thirds approval in the Senate.
Last year, PYMNTS reported France has long been trying to levy digital taxes on Big Tech. The U.S. maintained the taxes are discriminatory to U.S. companies. In 2019, France backed down after America delayed tariffs on $1.3 billion of French goods.
In fall 2020, Margrethe Vestager, the EU’s commissioner for competition, said that “if no effective agreement can be reached by the end of 2020, the EU should be willing to act alone.”