Author: ALAN RAPPEPORT, MILAN SCHREUER, JIM TANKERSLEY and NATASHA SINGER / Source: New York Times
WASHINGTON — A global attempt to prevent large, multinational companies from shifting their profits to lower-tax jurisdictions is setting off a fight between the United States and Europe, as policymakers on both sides of the Atlantic spar over efforts to impose new taxes on foreign firms.
On Wednesday, the European Commission is expected to take aim at Silicon Valley’s tech giants with a proposal to seriously revamp how technology companies are taxed in the 28-nation European Union. The plan, outlined in a draft obtained by The New York Times, would tax digital media companies based on where they generate revenue, rather than where they have their regional headquarters, which are often in countries like Ireland and Luxembourg that have lower tax rates.
The proposal comes in the wake of the new $1.5 trillion tax law that President Trump signed last year, which tried to crack down on profit-shifting by imposing a new minimum tax on the overseas earnings of any companies with United States operations. The international provisions in the United States tax law have angered some European leaders, who say they go too far and may violate World Trade Organization rules.
The global tensions — and the dueling tax efforts — stem from a shared concern among foreign governments that large, multinational corporations are not paying their fair share of taxes to the countries where they do business. American tech giants like Amazon, Apple and Google have kept their tax bills low for years by keeping profits overseas in lower-tax jurisdictions.
But there is no agreement about how to remedy such tax avoidance. The efforts are exacerbating the already heightened strain between the United States and Europe over a White House plan to impose stiff tariffs on most steel and aluminum imports.
“Tax and trade have basically merged” as issues between the United States and Europe, said Jay Khosla, the staff director for the Senate Finance Committee.
The Organisation for Economic Co-operation and Development has been trying to coordinate global efforts to combat tax evasion. In a report on digital taxation issued on Friday, which was separate from the European Union proposal, the organization said that more than 110 countries agreed to review the international tax system, parts of which had been rendered obsolete by the digital economy.
Officials from the organization said that debate over the proposed European digital tax had been intense at the gathering of the Group of 20 finance ministers in Buenos Aires on Monday. Steven Mnuchin, the United States Treasury secretary, assailed the concept as unfair to American companies.
“We think that having gross taxes on internet companies is not fair,” Mr. Mnuchin said in an interview on the sidelines of the G-20 meeting. “It is not the basis of how we think that they should be taxed, and we have been very clear in those discussions.”
He added: “To the extent that there are issues with change in taxation systems regarding physical presence, that needs to be addressed. It should not be a two-tiered system where internet companies are taxed under a different standard.”
Pascal Saint-Amans, the director of the O.E.C.D.’s Center for Tax Policy and Administration, said that the level of animosity could undermine what had been a coordinated, global effort to crack down on tax avoidance.
“There are very positive aspects which should be conducive to conversation, but the background is tension, with risks,” Mr. Saint-Amans said, adding…
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