European Union suspends digital royalty plans amid criticism from the United States

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BRUSSELS – In a gesture of goodwill towards the United States, the European Union on Monday suspended work on digital tax levy projects to focus on finalizing the landmark tax ruling approved by the Group of 20 nations this week -end.

Facing criticism from U.S. Treasury Secretary Janet Yellen, the European Commission said its work on the tax that would hit U.S. 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.

We will work together to reach this global agreement, said European Economic Commissioner Paolo Gentiloni. I informed Secretary Yellen of our decision to suspend the Commission’s proposal for a digital tax to allow us to focus, to work hand in hand, to reach the last mile of this historic deal.

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 must then legislate the rate in their own laws. The idea is that the countries where the companies are headquartered tax the foreign profits of these companies in their country if these profits are 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.

In addition, the EU has also tried to focus on companies that make profit in countries where they do not have a physical presence, for example through digital advertising or online retailing. Countries led by France have started imposing unilateral digital taxes that have hit America’s biggest tech companies, including Google, Amazon and Facebook.

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

Germany has also focused more on the agreed comprehensive corporate tax measures than on the EU’s digital tax plans.

The most important step is that we have an agreement on a global minimum tax and that we also have an agreement on how to better tax large companies with high profitability, including those that are active as global digital giants. , said German Finance Minister Olaf Scholz. For this reason, he said that not moving forward with exclusively European plans is also a sign that we are really making progress on getting a global deal.

The European Commission announcement came as Yellen met in Brussels with his euro area counterparts and senior EU officials.

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