UK and International Tax news
US To Withdraw From EU Negotiations On Digital Services Tax
Tuesday 23rd June 2020
The US Trade Representative has recently announced that the US will be withdrawing from talks with the EU and other countries on the taxation of digital services.
Earlier this month, the USTR announced investigations into digital services taxes that have been adopted or are being considered by 10 of the US’s trading partners, including the EU and UK. The investigations are being conducted under s.301 of the 1974 Trade Act which gives the USTR broad authority to investigate and respond to a foreign country’s action which may be unfair or discriminatory and negatively affect US commerce.
The EC is considering a DST as part of the financing package for its proposed COVID-19 recovery plan. The EU DST is based on a 2018 DST proposal that was not adopted but was to include a 3% tax on revenues from targeted advertising and digital interface services, and would have applied only to companies generating at least €750m in global revenues from covered digital services and at least €50m in EU-wide revenues for covered digital services.
The UK has included its proposed DST in the 2020 Finance Bill, effective from April 2020. The measure would apply a 2% tax on revenues above £25m to internet search engines, social media, and online marketplaces. The tax applies only to companies generating at least £500m in global revenues from covered digital services and £25m in in-country revenues from covered digital services. The FB is in the final stages of adoption by Parliament, and if passed, payments would be due from affected companies in 2021.
Following the announcement of the USTR’s investigations into the DST, the OECD Secretary General has issued a statement urging all members of the Inclusive Framework on BEPS to remain engaged in the ongoing negotiations towards the goal of reaching a global solution by the end of the year, drawing on the all the technical work that has been done during the last three years.
The SG has warned that “absent a multilateral solution, more countries will take unilateral measures and those that have them already may no longer continue to hold them back. This, in turn, would trigger tax disputes and, inevitably, heightened trade tensions. A trade war, especially at this point in time, where the world economy is going through a historical downturn, would hurt the economy, jobs and confidence even further. A multilateral solution based on the work of the 137 members of the Inclusive Framework at the OECD is clearly the best way forward”.
Mandated in 2018 by the G20 to deliver a consensus based solution by the end of 2020, the OECD has gathered 137 countries on an equal footing for the negotiations and has developed a two pillar approach, to be discussed in the following weeks leading up to a meeting of the Inclusive Framework in October 2020.
The OECD has confirmed that it will maintain its schedule of meetings to offer all members of the Inclusive Framework a place in the design of a multilateral approach.
If you would like more detail on OECD’s approach to a DST, please contact Keith Rushen on 0207 486 2378.Contact Us