One week after the US request to put the OECD negotiations on digital taxation on hold (see EUROPE 12509/17), international discussions do not seem to be completely dead and buried.
At a conference organised by Bloomberg Tax on Wednesday 24 June, the Director of the OECD's Centre for Tax Policy and Administration, Pascal Saint-Amans, did not rule out the possibility that an agreement might still be finalised in 2020.
He gave further assurances that the discussion process had not been interrupted and that all countries were participating. According to him, once the U.S. presidential election in November is over, the parties may have more room to negotiate.
In their reply letter sent last week — extracts of which EUROPE has obtained — the French, Spanish, Italian and British finance ministers also indicated that they still believe in the feasibility of an international agreement being reached in 2020.
“We believe that a phased approach, initially focused on automated digital services, would considerably ease the task of achieving a consensus-based solution and make a political agreement within reach this year”, they wrote.
It would also pave the way for “possible transitional solutions to be discussed with the United States, notably with respect to existing or upcoming national digital service taxes”, the letter said.
This is not a change of strategy in the face of American pressure, however, as a French source assured us. The Americans have always wanted to extend the tax to non-digital businesses, whereas several countries, including France, initially intended to only tax digital businesses.
Moreover, in his letter — which has been made public — the US Treasury Secretary, Steven Mnuchin, already indicated that the United States was not in a position to accept this common proposal for a phased approach, even on a provisional basis, as it would ultimately aim at “taxing more heavily only a limited group pf predominately US-based companies”.
The US announcement also gave rise to speculation that the OECD would then move forward on Pillar II alone of the reform, i.e. minimum corporate taxation. In his letter, Steven Mnuchin also stated that, since Pillar II does not present the same difficulties as Pillar I, the United States fully supports the conclusion of the negotiations this year.
Several countries are nevertheless opposed to this possibility, including France, who wants to keep the two pillars tied together in the same package.
It should be noted that the Business at OECD group of companies, which had suggested in the past that the priorities of OECD work on taxation should be reprioritised during the Covid-19 crisis, also reiterated its commitment to the OECD negotiations over digital taxation on Friday 26 June.
“Reaching a global solution is the only way to avoid unilateral solutions which would do great harm to tax certainty and global trade in general”, they wrote. (Original version in French by Marion Fontana)