EU Commissioner slams US tech tax plan: impact on global digital tax reform

European Union tax commissioner Paolo Gentiloni said on Tuesday that changes to the tax on digital income for businesses would be unlikely to happen if the Us continued to pursue a “safe haven” scheme that would allow companies to choose how to tax them, according tomedia reports.

EU Commissioner slams US tech tax plan: impact on global digital tax reform

It follows a joint commitment by 137 countries to rewrite outdated cross-border tax policies to reform the tax system that has been pushed to a tipping point by companies such as Amazon, Facebook and Google, which count profits in countries such as Ireland, regardless of where their customers are located.

A global agreement would be crucial to avoiding a trade war and for countries with different levels of tax revenue for digital income. However, the formulation of the agreement became very complicated due to differences in positions.

The U.S. accepted the reform in principle, but proposed allowing companies to choose between paying taxes under existing rules or under future rules. The Organisation for Economic Co-operation and Development (OECD), the global body now responsible for tax standards, is consulting on future tax policies.

Speaking to lawmakers at the European Parliament in Brussels, Mr. Hentiloni said the US proposal “would actually make the possibility of finding a global solution very low”.

But He also said he remained confident that a preliminary agreement would be reached in July, and that a meeting of finance ministers from the G20’s most industrialized countries in Saudi Arabia on February 20-23 could lead to a deal.

He also reiterated that the European Commission would propose tax reform at the European level if a compromise could not be reached by the end of the year.

However, the EU’s sweeping reform of digital taxes has failed in the past few years because of opposition from Ireland and other low-tax countries.