EU Countries Targeted by U.S. Trade Probe to Meet Thursday (1)

June 10, 2020, 9:16 PMUpdated: June 11, 2020, 1:52 PM

A number of EU countries targeted by the U.S. trade investigation into their digital taxes are meeting Thursday to discuss the U.S. concerns, officials said.

The video-conference meeting will include Austria, the Czech Republic, and several other EU countries, officials from the Austrian and Czech finance ministries told Bloomberg Tax Wednesday. The European Commission will also be part of the discussion, an EU source told Bloomberg Tax Thursday.

“We are currently carefully analysing the notification by the US of its Section 301 investigation on a digital service tax in the EU and some Member States and third countries,” the EU source said.

It is a “normal course of business” for member states and the Commission to discuss and coordinate, the source said.

The U.S. Trade Representative on June 2 launched a Section 301 trade probe—which can be a precursor to tariffs if the measures are found to be discriminatory to U.S. businesses. The investigation targets 10 digital tax laws or proposals worldwide: Austria, Brazil, the Czech Republic, the EU, India, Indonesia, Italy, Spain, Turkey, and the U.K.

“At the moment, the Czech Republic, through the Ministry of Finance and the Ministry of Industry and Trade, is concentrating on the possibility of coordinating joint action with other states to which the U.S. initiative is to be directed,” Michal Zurovec, a spokesperson for the Czech Ministry of Finance, told Bloomberg Tax on Monday. The effort was still at an early stage, he said.

An official from the Austrian finance ministry confirmed that Austria as well as other EU countries with digital services taxes are participating in the Thursday meeting.

The EU acts in unity “in this and all other trade-related matters,” the EU source said Thursday.

Earlier this year, the U.S. and France stepped back from the brink of a trade war over a 3% revenue tax on digital services France enacted in 2019. The U.S. had threatened tariffs on imports of French goods like wine, but the countries said they would focus on working toward a multilateral digital tax solution at the Organization for Economic Cooperation and Development. France said it would hold off on collecting its tax until the end of the year.

“The Commission and EU member States are committed to agreeing structural and long-term global solutions to questions of where digital services should be taxed,” and working toward an OECD solution by the end of this year, the EU source said.

Even before the June 2 announcement of the trade probe, the U.S. had warned it would take action against countries imposing unilateral digital tax measures like France’s. That didn’t stop a number of countries from moving ahead with measures of their own.

The Czech Republic indicated Wednesday it will lower the rate of its country’s proposed digital services tax—from 7% to 5%—and delay the effective date until January 2021.

Spain last week pushed ahead with a 3% digital services tax currently being debated by lawmakers.

The Italian finance ministry didn’t reply to a request for comment. A source in the Spanish finance ministry said Spain’s position has been that it plans to adapt its measure to the solution agreed to at the OECD.

(Updates Wednesday story by adding comments throughout from the European Commission.)

To contact the reporters on this story: Jan Stojaspal in Prague at correspondents@bloomberglaw.com; Hamza Ali in London at hali@bloombergtax.com; Isabel Gottlieb in Washington at igottlieb@bloombergtax.com

To contact the editors responsible for this story: Meg Shreve at mshreve@bloombergtax.com; Vandana Mathur at vmathur@bloombergtax.com

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