- The U.S. government stated that levying a digital tax violates fair trade practices because it affects American companies to a large extent.
- Paris' demand for a digital tax signifies the end of the truce with the United States.
- The European Union also acknowledges that there are fundamental differences on the issue of multilateralism.
According to French officials, company executives, and consultants, a number of US technology companies, such as Facebook and Amazon, have recently received information from French tax authorities requesting them to pay millions of euros in digital taxes for 2020. This reportedly angered the US government.
The U.S. government stated that levying a digital tax violates fair trade practices because it affects American companies to a large extent.
The timing of the EU’s digital tax is very delicate. It was chosen a few weeks before Joe Biden’s inauguration as President of the United States. This may reignite the tensions in transatlantic trade and trigger the US to impose new tariffs on Europe.
Previously, the Office of the United States Trade Representative had threatened to impose 100% import duties on champagne and cheese. France is the country with the most aggressive digital tax collection in Europe.
However, the governments of several other countries have proposed or passed laws to implement it, including the United Kingdom. The UK plans to start collecting its own digital tax in April this year.
This summer, US Trade Representative Robert Lighthizer announced that it will launch investigations into the United Kingdom, Italy, Austria, Brazil, Indonesia, and the European Union and other countries that are implementing digital taxes. This may cause the Trump administration to impose more tariffs before the end of its term.
Paris’ demand for a digital tax signifies the end of the truce with the United States. In January of this year, the two sides agreed to allow more time to negotiate on the multilateral taxation framework supervised by the Organisation for Economic Co-operation and Development (OECD), which will gradually begin this year.
As a prerequisite for the truce, France agreed to temporarily suspend the collection of digital taxes. However, in June of this year, the Trump administration suspended negotiations with OECD member countries and does not expect any solution until the middle of next year.
France stated that it hopes that the EU will propose a taxation of digital services across Europe in early 2021 to prevent the OECD negotiations from not progressing. However, its first choice is still to achieve international solutions through the organization.
At present, in the U.S. Congress, both parties are opposed to countries levying digital service taxes on their own. The US government hopes to reach a multilateral agreement through OECD negotiations.
Other Efforts in Europe
European countries hope that the United States can understand what Europe is doing, and increase its willingness to cooperate on issues such as climate and health incidents. However, due to differences in digital taxes and other issues, the United States and Europe still face difficult obstacles to reach a consensus on the above issues.
The President of the European Commission, Ursula von der Leyen, recently called on the EU to take the initiative to work with the United States and other countries to write a rulebook for the digital economy and society, and cover data usage and privacy protection of large-scale technologies, from infrastructure arming to security.
She also urged raising the standards of global partners to deal with the problems of large technology companies. She said that although the EU will continue to promote the taxation of technology companies based on the consensus reached by the OECD and G20. If it fails to reach an agreement before the 2021 deadline, Europe will take other actions.
David O’sullivan, a former senior EU official and former US ambassador, said that the deep differences between the EU and the Trump administration have almost inevitably led to confrontation. Although there are many differences with the Biden administration, they will have more in common.
Dim Prospects for Multilateralism
Although the United States and the European Union have consensus on many issues, the European Union also acknowledges that there are fundamental differences on the issue of multilateralism.
The United States has been pressing the EU for a long time, asking the EU to take more responsibility for its own security and the crises in the surrounding areas. At present, this pressure is unlikely to abate.
The EU foreign ministers will discuss the issue of transatlantic relations at the December 7 meeting, which may also be included on the agenda of the regular summit of EU leaders scheduled to be held later this week.
In terms of trade, the EU hopes to ease trade tensions. In the Trump era, this tension has caused European steel imports to be labeled as a national security threat. President Trump has threatened that EU-made cars may be hit by additional tariffs.
Biden Intends to Ease US-Europe Relations
President Trump’s request for a digital tax, and possible additional tariffs on US allies, have created difficulties for Mr. Biden. He has stated that he will seek to ease diplomatic and trade tensions with European governments. Among them, Mr. Biden is already trying to ease US-Europe relations in the personnel appointment and removal plan.
The next president announced a series of major diplomatic appointments this week, including the nomination of former Deputy National Security Adviser Antony Blinken, who is fluent in French, as Secretary of State, and John Kerry as the special climate envoy, who served as President Obama’s Secretary of State.