EU suspends digital royalty plans amid US criticism

[ad_1]

The European Union has suspended work on digital tax plans for now in order to focus on finalizing the landmark tax ruling approved by the Group of 20 nations over the weekend, officials said on Monday.

Facing US criticism, the European Commission said its work on the tax that would hit US tech companies would be frozen to allow smooth cooperation on political and technical hurdles that still need to be overcome on the G-20 tax. decision before the end of October.

“Successfully concluding this will require a last-ditch effort, a last-ditch effort from all parties. And the Commission (EU) is committed to focusing on that effort,” said EU spokesperson Dan Ferrie. “For this reason, we have decided to suspend our work on a digital tax proposal as a new EU resource during this period.”

Finance ministers from major G-20 economies have approved a global minimum corporate tax of at least 15%, a move to put a floor on tax rates and discourage businesses from using countries to low rate as tax havens.

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

Countries would then have to legislate the rate in their own laws. The idea is that the headquarters countries tax the foreign income of their companies in their country if this income is not taxed in the low-rate countries. This would remove the rationale for using complex accounting schemes to shift profits to subsidiaries in countries with low taxation, and where companies can do little or no real activities.

Apart from this context, the EU has also tried to focus on companies that make profits in countries where they do not have a physical presence. It could be through digital advertising or online retailing. Countries led by France have started imposing unilateral “digital” taxes that hit America’s biggest tech companies like Google, Amazon and Facebook.

The United States calls these unfair trade practices and has threatened retaliation through import taxes.

The European Commission’s announcement came as US Treasury Secretary Janet Yellen met with her eurozone counterparts and senior EU officials.

[ad_2]