Digital Tax: No Support for the US ‘Safe Harbour’ Approach

The US proposition to make Pillar One optional by allowing companies to ‘opt out’ of the newly proposed profit allocation rules continues to create tensions among governments and “will not fly politically”, the OECD Tax Director Pascal Saint- Amans said on Thursday. In addition, Martin Kreienbaum, the Chair of OECD’s Committee on Fiscal Affairs, who is also a Director General for International Taxation at the German Federal Ministry of Finance, stated that countries will not accept partial solutions, saying the “Germany is willing to compromise on Pillar One only if there is a Pillar Two as well”, which concerns the global anti-base erosion proposal and minimum tax.

At the World Economic Forum next week in Davos, Switzerland, US President Donald Trump is expected to discuss digital taxes with the EU Commission President Ursula von der Leyen, seeking to avoid retaliatory tariffs or trade barriers between the US and the EU. Neither the European Commission nor the White House have confirmed the meeting yet.

As CFE reported last week, following the French digital tax being signed into law on 24 July 2019, which imposes a 3% digital services tax on resident and non-resident companies with a global turnover above 750 million Euros, and a national turnover above 25 million Euros, US President Donald Trump tweeted that there would be “substantial reciprocal action” taken by the US concerning the digital tax.

French finance minister Bruno Le Maire stated that he and US Treasury Secretary, Steven Mnuchin had “agreed to redouble the effort in the coming days to find a compromise on digital tax in the framework of the OECD”, however also warned that France would react were the US to impose the threatened tariffs.

Ref.: CFE’s Tax Top 5 – 20 January 2020

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