OECD: No deal on digital tax risks trade war

The Secretary General of the Organization for Economic Cooperation and Development (OECD), Angel Gurria.

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There is a risk of a trade war over technology taxes, says OECD Secretary General Angel Gurría

The head of the Organization for Economic Cooperation and Development said that countries must agree on an approach to tax technology giants or risk widespread trade war.

Angel Gurría’s warning comes when a growing number of countries, including the UK, are imposing new withdrawals on digital sales.

Last week, the United States launched a tax investigation, saying it unfairly targeted American companies.

Such a process could lead to tariffs.

For more than a year, the OECD has followed talks aimed at reaching a multilateral agreement.

The United States, home to Internet giants such as Amazon, Google and Facebook, has claimed to support this process, but its position on the matter differs significantly from the interests of other members.

Treasury Secretary Steven Mnuchin said that taxes should be based on income, not sales, and should not be targeted to a specific sector.

Last year, the United States threatened tariffs for 2.4 billion dollars of French exports, including cheese and champagne, after the country went ahead with its digital services tax, a 3% tax on revenues. of digital services provided by large companies.

They were postponed this winter, after France said it would hold back on the harvest pending OECD negotiations, which are expected to end later this year.

But many other countries have moved on to introduce their own version of the tax, including the Czech Republic and Thailand just this week. In the UK, a 2% tax on digital sales went into effect in April.

“The last thing we need”

Speaking with the BBC, Gurría said that “we must” reach an agreement.

The alternative is “you will have another trade war, except this time not only between France and the United States, which has almost happened and we managed to avoid it, but … with dozens and dozens of countries”.

“This is the last thing we need right now, Covid’s time. We already know how much it costs the world in terms of well-being when there are commercial tensions,” he said.

Trade war

Under United States President Donald Trump, the United States has taken an aggressive trading stance. It imposed customs tariffs on foreign steel and aluminum and billions of dollars of Chinese goods.

Last year the International Monetary Fund estimated that the U.S.-China trade war would have reduced global growth by nearly 1% in 2019.

The United Kingdom has entered into trade talks with the United States.

After the United States announced its investigation last week, it declined to comment on how its digital service tax could impact these negotiations.

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