06/18/2020

U.S. Pulls Out of Digital Tax Talks

Administration officials believe the tax would unfairly target large U.S.-based companies

The U.S. government has withdrawn from months-long international negotiations on a digital tax deal that Trump administration officials believe would unfairly target large U.S.-based tech companies.

The Organization for Economic Cooperation and Development (OECD) has been trying to reach agreement among nearly 140 countries on a global tax overhaul to address how “consumer-facing” digital giants like Apple, Google, Facebook and Twitter are taxed in countries where they have users. The OECD’s work has taken on some urgency as some countries have grown impatient and proposed their own digital tax plans while hoping for an international consensus.

Treasury Secretary Steven Mnuchin had sought changes in the OECD framework that would allow some American companies to opt out of the global taxes. Corporate losses experienced by multinationals during the COVID-19 pandemic have companies seeking reassurances that they could offset some of their future taxes with losses from this year. This week, Mnuchin decided the talks were off.

“We were making no headway and [Treasury Secretary Mnuchin] made the decision that rather than have them go off on their own he would just say we’re no longer involved in the negotiations,” U.S. Trade Representative Robert Lighthizer said during a House Ways and Means hearing this week.

Should the U.S. not resume talks on a global tax deal, U.S. tech companies could find themselves facing a bevy of unilateral digital taxes from different nations. European countries are reportedly working on a response to Mnuchin’s decision. The Trump administration’s response to different digital tax proposals has been to threaten tariffs on foreign goods and services.

“We have a situation where a variety of countries have decided that the easiest way to raise revenue is to tax somebody else’s companies and they happen to be ours,” Lighthizer said. “The United States will not let that happen.”

This article was provided to OSAE by the Power of A and ASAE's Inroads.