Digital Tax Deal Failure Would Risk Trade War, OECD Chief Says

July 1, 2020, 2:27 PM

Failure to find a global deal on digital taxation could trigger a trade war, Jose Angel Gurria, secretary general of the Organization for Economic Cooperation and Development, warned Wednesday.

Speaking by videolink to representatives of 144 countries, jurisdictions and organizations, Gurria also suggested members were likely to reach only a partial agreement this year. Before the coronavirus crisis, the OECD had aimed to finish the project by the end of 2020.

  • Talks on the project appeared last month to be on precarious ground, after the U.S. called for a pause on “Pillar One” of the OECD’s proposed digital tax, which would reallocate multinationals’ profits to the jurisdictions where they have users or consumers. Washington argues that focusing the rules on digital companies, as some countries have suggested, would disproportionately impact American technology giants.
  • The Trump administration has threatened trade sanctions on countries pursuing unilateral solutions.
  • Gurria said that, contrary to reports, the U.S. remains—notwithstanding its request for a delay to Pillar One—engaged in the project.
  • “Trade wars and tax wars are not what we need in today’s seriously compromised economy,” he said, imploring countries to “compromise and advance towards a solution on Pillar One.”

—With assistance from Isabel Gottlieb.

To contact the reporter on this story: Joe Stanley-Smith in London at jstanleysmith@bloombergtax.com

To contact the editors responsible for this story: Meg Shreve at mshreve@bloombergtax.com; David Jolly at djolly@bloombergindustry.com

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