US Treasury Secretary Steven Mnuchin has issued a statement noting “strong” concerns with countries’ consideration of a digital services tax proposal.
In March 2018, the EU Commission announced it proposal to introduce an interim tax, which would cover the main digital activities that currently escape tax altogether in the EU.
The tax would apply to companies with total annual worldwide revenues of EUR750m and EU revenues of EUR50m, where these revenues are created from activities where users play a major role in value creation and which are the hardest to capture with current tax rules, such as revenues created from selling online advertising space.
In his statement, Mnuchin noted that “a tax should be based on income, not sales, and should not single out a specific industry for taxation under a different standard.” Mnuchin said that the “unilateral” and “unfair” digital services tax proposal targets US technology and internet companies.
Mnuchin urged countries to finish the OECD process and not take unilateral action in this area.
Mnuchin said: “Treasury is working very closely with the OECD and our counterparts there to address issues of base erosion and fair taxation. We believe the issues are not unique to technology companies but also relate to other companies, particularly those with valuable intangibles. I have instructed our team to continue their efforts in the OECD so that we can make progress on these issues quickly.”
Earlier this month, the Chairman of the US Senate Committee on Finance, Orrin Hatch, wrote to the presidents of the European Commission and European Council stating that the EU digital tax proposal “has been designed to discriminate against US companies and undermine the international tax treaty system.”
The EU digital tax proposal creates “a significant new transatlantic trade barrier that runs counter to the newly-launched US and EU dialogue to reduce such barriers,” Hatch said.