Digital Tax Fight Emerges as Global Economic Threat

Some administration officials privately express concerns that the global minimum tax under discussion could discourage countries from further reducing their corporate tax rates, as the United States did in 2017. Lower rates, these officials argue, make their economies more attractive to global investment and help companies. Other economists say the competition to lower rates have encouraged firms to shift profits, at least on paper, to tax havens.

The economic impact of the digital services taxes on the United States is relatively small, but American companies fear the levies could evolve to hit a broader swath of sectors beyond tech. A recent analysis by the O.E.C.D. found that the international tax changes under consideration would increase global corporate taxes by about $100 billion.

The taxes have drawn the ire of President Trump, who has criticized Europe’s attempt to collect more taxes from American companies. Last year, Mr. Trump said the United States would retaliate against France’s digital tax by imposing tariffs of up to 100 percent on French products such as wine, cheese and handbags. The United States agreed last month to delay those tariffs and France agreed to delay collection of the taxes in the hope that a more global agreement could be reached.

European finance ministers expressed urgency on Saturday to reach an agreement, hoping to find common ground with the United States and avoid a broader economic conflict.

“Next year is coming very soon,” said Olaf Scholz, Germany’s finance minister. “There is not time to wait for elections.”

But major obstacles remain and the strong opposition to any plan that would allow American companies to opt out of taxes was palpable.

“Clearly, there is a need to avoid any kind of optional solution,” said Bruno LeMaire, the French finance minister. “I do not know of any private company that would choose to be taxed instead of not being taxed.”

Article source: https://www.nytimes.com/2020/02/22/us/politics/digital-tax-economy-europe-united-states.html