Mnuchin raises concerns over global talks on taxing digital economy

Treasury Secretary Steven Mnuchin is raising concerns about ideas being considered in international discussions over how to address the tax challenges of the digital economy.

Mnuchin said in a letter Tuesday to the Organization for Economic Cooperation and Development (OECD), the group holding the discussions about international tax rules, that the U.S. has “serious concerns” about potential mandatory departures from “longstanding pillars of the international tax system upon which U.S. taxpayers rely.”

The letter comes after the U.S. Trade Representative (USTR) on Monday found that France’s digital services tax is discriminatory and proposed tariffs of up to 100 percent on $2.4 billion in French products. The USTR also said that it’s considering opening investigations into digital services taxes in other countries.

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U.S. policymakers and tech companies have criticized countries interested in country-specific digital services taxes, arguing that they unfairly target American tech businesses. They have instead been hoping that the OECD can reach an agreement on international tax rules. The OECD is hoping to come out with an agreement by the end of next year to prevent more countries from acting unilaterally.

In his letter, Mnuchin said that the U.S. “firmly opposes” digital services taxes, arguing that they’re inconsistent with the principles in current international tax rules. He urged “all countries to suspend digital services tax initiatives, in order to allow the OECD to successfully reach a multilateral agreement.” 

Mnuchin said that the U.S. supports the discussions at the OCED, and that the U.S. believes “there is broad support for greater tax certainty and administrability.” 

But he said he was worried about a mandatory break from longstanding standards about where taxes should be paid and on what basis. The OECD is looking at revising rules in this area as part of Pillar 1 of its efforts. 

“Nevertheless, we believe that taxpayer concerns could be addressed and the goals of Pillar 1 could be substantially achieved by making Pillar 1 a safe-harbor regime,” Mnuchin said.

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Pillar 2 of the OECD’s project is focused on ensuring that multinational companies pay a minimum level of tax. Mnuchin said that the U.S. supports a solution for Pillar 2 that resembles a minimum tax on foreign earnings created by President Trump‘s tax law.

In a letter Wednesday in response to Mnuchin’s letter, OECD Secretary-General Angel Gurría thanked Mnuchin for his support for the OECD discussions and said that it was Trump’s tax law that “set the framework conditions within which we have advanced.”

But Gurría said that the OECD “had so far not come across the notion that Pillar 1 could be a safe-harbour regime.”

“We raise this concern, as it may impact the ability of the 135 countries that are now participating in this process, to move forward within the tight deadlines we established collectively in the Inclusive Forum,” he said.

Gurría asked Mnuchin if he’d be able to come to Paris for a meeting, ideally before Christmas, in order to help the OECD find the best path forward.

-Updated at 3:59 p.m.

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Written by Alan Smith

Alan Smith

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