Reforming global tax rules is hard. Never more so than in a year when re-election is sought by a president who once claimed it was “smart” not to pay federal tax. A US decision that international tech tax talks have reached an impasse is unsurprising. The fallout could be damaging all the same.
France said the US suspension of talks at the Paris-based OECD was “a provocation”. It vowed to press ahead with its own digital levy, as did other countries aiming new taxes at the likes of Apple, Facebook and Google. Those, in turn, have sparked fury in Washington, which considers measures that disproportionately hit US multinationals discriminatory. It threatens to retaliate with tariffs.
The new digital taxes are smallish. The UK’s 2 per cent levy on revenues stands to bring in around £500m, for example. But the US fears they are seen as a handy income source for foreign governments that calculate the easiest way to raise revenue is to tax somebody else’s companies.