Corporate Tax

Digital tax plans placed on maintain as a consequence of US criticism as EU drafts international corporate tax measures

BRUSSELS (AP) – In a gesture of goodwill to the United States on Monday, the European Union put work on digital tax plans on hold for the time being to focus on finalizing the historic tax decision made by the group of The weekend was approved by 20 nations.

Faced with criticism from U.S. Treasury Secretary Janet Yellen, the European Commission said its work on the levy that would hit American tech companies would be on hold to allow smooth collaboration on the political and technical hurdles that remain to be addressed on the G20 tax resolution before the end of October.

“We will work together to achieve this global agreement,” said EU Economic Commissioner Paolo Gentiloni. “I have informed Secretary Yellen of our decision to put the Commission’s proposal for a digital levy on hold so that we can focus and work hand in hand to achieve the final mile of this historic deal.”

Finance ministers in the major G-20 economies advocated a minimum global corporate tax of at least 15%, a measure aimed at lowering tax rates and discouraging companies from using low-tax countries as tax havens.

The global minimum proposal faces political and technical hurdles before it comes into force. Details are to be ironed out in the coming weeks at the Organization for Economic Co-operation and Development in Paris, followed by final approval by the G-20 presidents and prime ministers at a meeting in Rome from October 30th to 31st.

Countries must then set the rate in their own laws. The idea is that countries where companies are headquartered will tax the foreign profits of those companies domestically if those profits are not taxed in low-tax countries. This would eliminate the need to use complex accounting systems to transfer profits to subsidiaries in low tax countries where the companies may do little or no actual business.

In addition, the EU has also tried to focus on companies making profits in countries where they have no physical presence, for example through digital advertising or online retailing. Countries headed by France have begun imposing unilateral “digital” taxes, which hit the largest US tech companies like Google, Amazon and Facebook.

The US calls this unfair trade practices and has threatened retaliation through import taxes.

Germany also focused more on the agreed global corporate tax measures than on EU plans for digital taxation.

“The most important step is that we have an agreement on a global minimum tax and that we also have an agreement on how we should better tax large, highly profitable companies, including those that act as global digital giants,” said Federal Finance Minister Olaf. Scholz. That is why he said that it is also a sign that we are really making progress towards reaching a global deal.

The European Commission’s announcement came when Yellen met with colleagues from the euro zone and senior EU officials in Brussels.

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