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Daily Tax Report: International

U.S. Will Participate in Upcoming Global Digital Tax Discussions

June 19, 2020, 7:00 PM

The U.S. plans to participate in a meeting in early July to discuss an OECD-led effort to overhaul how the digital economy is taxed, a Treasury spokesperson told Bloomberg Tax Friday.

The confirmation of U.S. participation comes after Treasury said Wednesday it wanted to pause discussions over the effort. Earlier in the day U.S. Trade Representative Robert Lighthizer had said Treasury Secretary Steven Mnuchin was withdrawing the U.S. from the talks.

The U.S. also participated in a series of steering group meetings earlier this week, according to two sources familiar with discussions.

The effort, involving 137 countries in negotiations, is seeking to address concerns that multinationals —particularly big tech—aren’t paying enough tax and discourage countries from pursuing unilateral digital tax measures aimed at the revenue of companies like Facebook and Google.

Will the next trade war be over digital taxation? This video explains how digital taxes work and whether the international community can find a solution to this growing global rift over how to tax the digital economy.

The Organization for Economic Cooperation and Development originally targeted July for reaching agreement on the plan, but moved the goal for political agreement back to fall because of the pandemic.

Calls for Pause

The U.S. has signaled it’s concerned about a part of the plan known as Pillar One, which would give taxing rights to countries where multinationals have users or consumers. The move would require a shift away from longstanding international tax norms, Mnuchin said in a June 12 letter to the finance ministers of the U.K., France, Italy, and Spain, which was seen by Bloomberg Tax.

The letter called for negotiations on Pillar One to be put on hold during the pandemic, but picked up again later this year.

The U.S. supports finding an agreement on Pillar Two, a global minimum tax, by the end of the year, the letter said.

A proposal from Mnuchin late last year to let companies opt into part of the new rules has caused an “impasse” in the negotiations after other countries rejected the U.S. proposal, Mnuchin said.

That proposal hasn’t been well received by other countries. A German official said Thursday that Mnuchin’s “safe harbor” proposal is making it difficult for countries to agree on technical issues in Pillar One.

The U.S. Trade Representative’s office didn’t immediately respond to a request for comment.

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