The United States has exited negotiations with several European countries over plans to tax American tech companies. The US has threatened to retaliate with tariffs if the European countries move forward with the taxation plans. Among others, Austria, France, Spain, Hungary, Italy, Turkey, Czech Republic, Slovakia, Latvia, Norway, Slovenia, and the UK are considering plans to tax digital services. The digital tax plan would place levies on American tech companies like Amazon, Google, and Facebook operating in Europe. A top EU official said the bloc would act on its own if a digital tax deal could not be reached. The US could still avoid escalation through a possible settlement or counter the proposed digital taxes through the use of retaliatory US tariffs.
The Organization for Economic Cooperation and Development (OECD) is attempting to find agreement among around 140 countries regarding a global tax overhaul that would address how multinational corporations are taxed in the countries where they have consumers or users. Such an agreement would prevent countries from implementing their own versions of digital taxes. The OECD’s proposed global digital tax plan would operate based on two key pillars: the first portion would give countries the right to tax profits based on sales within their borders, and the second would implement a global minimum tax preventing countries from lowering tax rates to gain an advantage when competing to host tech companies.