Mnuchin warns UK, Italy of tariffs if digital tax plans are implemented

Treasury Secretary Steven Mnuchin warned the United Kingdom and Italy that they will face tariffs if they move forward with digital tax plans, The Wall Street Journal reported Tuesday. 

At an event sponsored by the Journal on the sidelines of the World Economic Forum in Davos, Switzerland, Mnuchin said he hoped the two countries would put their plans on hold.

“If not, they’ll find themselves faced with President Trump’s tariffs,” Mnuchin said, according to the newspaper.

Several European countries are pursuing taxes on large tech companies such as Amazon, Facebook and Google. France enacted such a tax last year, Italy’s Parliament approved a digital tax late last year and the U.K. is set to implement this type of tax this year.

European countries are seeking to raise revenue from businesses that have many users in their nations but pay little taxes there. But U.S. policymakers on both sides of the aisle argue that the digital taxes unfairly target American companies.

The U.S. trade representative in December determined that France’s digital tax was discriminatory and proposed tariffs of up to 100 percent on $2.4 billion in French goods as a response.

Trump and French President Emmanuel Macron spoke about France’s digital tax on Monday, the same day that the Journal reported that the two countries have reached a truce under which France has agreed to postpone its tax until the end of the year, while the U.S. will postpone tariffs. 

Trump confirmed the agreement in an interview with the Journal on Tuesday, saying that “if anybody is going to tax these companies, it’s going to be U.S. that taxes these companies.”

Macron tweeted on Monday that the U.S. and France “will work together on a good agreement to avoid tariff escalation.”

Mnuchin said at the Journal’s event on Tuesday that the agreement is “the beginning of a solution.”

The U.S., France and other countries are working on international tax rules through the Organization for Economic Cooperation and Development, though Mnuchin last month raised some concerns about ideas being considered as part of those discussions.

“If reports are accurate, we’re pleased that the United States and France have come to an agreement that would postpone a discriminatory tax on American technology companies until the multilateral process is complete,” said Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and ranking member Ron Wyden (D-Ore.) in a statement. “We urge other countries that have proposed digital services taxes to follow suit. The multilateral OECD process offers the greatest potential for long-term success in resolving complex tax issues created by digitalization. We will continue to support that effort.”

—Updated at 5:51 p.m.