Trade

US pressures France, UK on tech tax proposals ahead of G7

Transatlantic tension flared Friday as Washington took aim at proposals from Paris and London to start taxing the revenue of digital giants, in a spat set to overshadow a meeting of G7 finance ministers in France next week.

Hours after the White House opened an investigation into Frances plan for a digital services tax, the U.S. Treasury Department upped the ante by declaring it would review the possibility of doubling taxes on French companies and citizens with U.S. income in response to Paris proposal.

The U.K. has also incurred Washingtons ire, with U.S. lawmakers warning that a digital services tax would imperil any post-Brexit trade deal between Britain and the United States.

“I met with U.K. officials earlier and said, You expect a trade agreement with the U.S. and the U.K. It will not happen with your digital services tax. Period. Full stop,'” Senator Ron Wyden, the top Democrat on the Senate Finance Committee, told journalists.

Both Paris and London have stated they would only impose a digital service tax temporarily, until a broader OECD measure is put in place.

The threats from Washington are testing London and Pariss resolve to move ahead with a tax that would chiefly target the revenue of large Silicon Valley companies like Google and Facebook, which politicians accuse of paying too little into national coffers despite generating billions of dollars of revenue in Europe.

In an address to the French Senate on Thursday, Finance Minister Bruno Le Maire struck a defiant tone in the face of U.S. pressure. “France is a sovereign state that makes its own fiscal decisions, and will continue to do so,” he told the chamber minutes before Senators voted to approve the digital services tax.

But France and Britain are likely to face further challenges from the U.S. at a gathering of finance ministers from the Group of Seven industrialized nations in Chantilly, France, next week.

London is seeking a free trade deal with the U.S. to shore up its economy in the event of a no-deal Brexit. The prospect for such an agreement has been eagerly touted by prospective U.K. Prime Minister Boris Johnson, but it also grants U.S. President Donald Trump unique leverage over London in regard to the digital tax.

The U.K. government is under pressure to reform its tax system and to extract more revenue from digital companies. Doing so is popular among many Conservative and opposition MPs, who are under pressure from local businesses and who have seen their high streets struggling in recent years.

In an address to the French Senate on Thursday, Finance Minister Bruno Le Maire struck a defiant tone in the face of US pressure | Eric Piermont/AFP via Getty Images

At an event in York last Thursday, Johnson said a way had to be found of “taxing the internet giants on their income, because at the moment it is simply unfair.”

“I think its deeply unfair that high street businesses are paying tax through the nose… whereas the internet giants, the FAANGs — Facebook, Amazon, Netflix and Google — are paying virtually nothing,” Johnson said at a leadership hustings event in York, northern England.

But two figures close to Johnsons campaign said they did not think he had yet formulated a firm policy approach to taxing digital companies.

French President Emmanuel Macron, who will be hosting G7 ministers at the town near Paris starting Wednesday, runs the risRead More – Source

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