EU suspends digital levy plan to focus on global taxation

BRUSSELS – In a gesture of goodwill towards the United States, the European Union on Monday suspended its digital tax levy project to focus on finalizing the comprehensive minimum corporate tax decision approved by the Group of 20 nations this weekend.

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 have 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 countries where companies are headquartered tax the foreign income of those companies at home if that income is not taxed in 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, highly profitable companies, including those that are active as global digital giants.” , said German Finance Minister Olaf Scholz. For this reason, he said that not going ahead with exclusively European projects “is also a sign that we are really making progress towards getting a global deal”.

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

U.S. Treasury Secretary Janet Yellen prepares to speak during a meeting of Eurogroup finance ministers at the European Council building in Brussels on Monday, July 12, 2021 (AP Photo / Virginia Mayo)

US Treasury Secretary Janet Yellen, left, and Irish Finance Minister Paschal Donohoe pose ahead of a meeting of Eurogroup finance ministers at the European Council building in Brussels on Monday July 12, 2021 (AP Photo / Virginia Mayo )

US Treasury Secretary Janet Yellen, left, and Irish Finance Minister Paschal Donohoe pose ahead of a meeting of Eurogroup finance ministers at the European Council building in Brussels on Monday July 12, 2021 (AP Photo / Virginia Mayo )

European Commissioner for the Economy Paolo Gentiloni attends a meeting of Eurogroup finance ministers in the European Council building in Brussels on Monday, July 12, 2021 (AP Photo / Virginia Mayo)

European Commissioner for the Economy Paolo Gentiloni attends a meeting of Eurogroup finance ministers in the European Council building in Brussels on Monday, July 12, 2021 (AP Photo / Virginia Mayo)

European Economic Commissioner Paolo Gentiloni, second from right, speaks with Fabio Panetta, member of the ECB's executive board, third from left, during a meeting of Eurogroup finance ministers at the European Council building in Brussels on Monday July 12, 2021 (AP Photo / Virginia Mayo)

European Economic Commissioner Paolo Gentiloni, second from right, speaks with Fabio Panetta, member of the ECB’s executive board, third from left, during a meeting of Eurogroup finance ministers at the European Council building in Brussels on Monday July 12, 2021 (AP Photo / Virginia Mayo)

German Finance Minister Olaf Scholz, center, attends a meeting of Eurogroup finance ministers in the European Council building in Brussels on Monday, July 12, 2021 (AP Photo / Virginia Mayo)

German Finance Minister Olaf Scholz, center, attends a meeting of Eurogroup finance ministers in the European Council building in Brussels on Monday, July 12, 2021 (AP Photo / Virginia Mayo)

US Treasury Secretary Janet Yellen, center, poses for a group photo of Eurogroup finance ministers at the European Council building in Brussels on Monday, July 12, 2021 (AP Photo / Virginia Mayo)

US Treasury Secretary Janet Yellen, center, poses for a group photo of Eurogroup finance ministers at the European Council building in Brussels on Monday, July 12, 2021 (AP Photo / Virginia Mayo)


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