EU warns of BigTech tax after US pulls out of talks

The EU has again raised the prospect of imposing its own tax on tech giants such as Google, Facebook and Amazon after the US pulled out of negotiations for a global online services tax.

The US withdrew from negotiations organised by the Organisation for Economic Cooperation and Development (OECD) on Wednesday after its delegation warned that “no progress” had been made on agreeing a worldwide approach to tax reform for tech giants, Reuters reported.

The breakdown of talks raised the prospect of a trade war, following repeated claims from the US that the proposals would unfairly hit the revenues of its multinational tech firms.

The OECD secretary general Angel Gurria said: “A trade war, especially at this point in time, where the world economy is going through a historical downturn, would hurt the economy, jobs and confidence even further."

In the absence of an international agreement on the issue, EU countries - including the UK, France and most recently Spain - have moved to introduce their own domestic taxes on the revenues of digital and online platforms until a global solution can be found.

The UK has introduced a two per cent Digital Services Tax on revenues generated in the UK by companies with more than £500 million of global revenues, and is expected to raise £440 million by 2023.

It is intended to crackdown on technology companies which shift online profits generated from customers in one country to lower tax jurisdictions.

However, the UK treasury pledged to repeal the tax once OECD-led efforts to reach a global agreement was reached.

The OECD had pledged to have an international agreement in place by the end of 2020, but the withdrawal of the US, coupled with the focus on the US election in November, has cast doubt over the likelihood of a compromise being found.

In a framework published in January, the body pledged “reach a consensus-based long-term solution to the tax challenges arising from the digitalisation of the economy”.

The US announced it was pulling out of the talks via a letter sent to European nations by Treasury secretary Steven Mnuchin.

A joint letter in response sent by the UK, France, Italy and Spain branded the move a “provocation towards all the partners at the OECD when we were centimetres away from a deal on the taxation of digital giants”.

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