European nations offer limit on digital tax after US tariff threat

France, the United Kingdom, Spain and Italy have offered to limit their proposed digital tax after the U.S. threatened to slap tariffs on goods from those countries. 

In a letter to Treasury Secretary Steven Mnuchin obtained by Bloomberg News, the finance chiefs of those countries said this approach “would considerably ease the task of achieving a consensus-based solution and make a political agreement within reach this year.”

The U.S. and Europe have been in talks about how tech companies should be allowed to file taxes. President Trump has threatened retaliatory trade tariffs if new digital taxes are levied, as the White House views them as discriminatory against the U.S.’s big tech companies.

At the moment, tech giants such as Facebook, Google and Amazon are able to file taxes in countries with low tax rates, even though they operate globally.

In the United Kingdom, for example, Facebook only paid $37.2 million in corporation tax in 2018 but made a record $2.1 billion in British sales that year.

On June 17, Mnuchin withdrew from talks brokered by the Paris-based Organization for Economic Cooperation and Development, which aimed to create a global system for taxing digital services in the country where each transaction takes place.

In a virtual interview, European Commission Executive Vice President Margrethe Vestager said the EU would “really, really prefer a global consensus” on digital tax, but will push ahead with a regional tax, “if we need to.”