No global digital tax by end-2020 would mean chaos: France

RIYADH (Reuters) – Failure to reach a global deal on where and how much to tax digital giants such as Google (GOOGL.O), Amazon (AMZN.O) or Facebook (FB.O) would result in many digital tax regimes emerging all over the world, France’s Finance Minister said on Sunday.

It would also likely trigger U.S. retaliatory tariffs, U.S. Treasury Secretary Steven Mnuchin told reporters, underscoring Washington’s determination to thwart tax rules planned by France and other countries if no global deal is reached.

Speaking to Reuters on the sidelines of a meeting of world financial leaders, Bruno Le Maire said the gathering had been very useful in establishing consensus on such global tax rules.

Finance ministers and central bankers from the world’s 20 biggest economies, the G20, met in Riyadh for talks on economic issues, with digital taxation topping their two-day agenda.

Mnuchin said the issue was being addressed in negotiations with the Organization for Economic Cooperation and Development, and he hoped it could be resolved by the end of the year.

But he said Washington would strike back at the digital taxes passed by France and others if those efforts failed.

“We’ve been very consistent in saying we think the digital services tax is discriminatory in nature against digital companies, and specifically a handful of U.S. companies,” he said. “The president was clear that we were proceeding with … reciprocal tariffs.”

France and the United States have declared a truce to allow the multilateral talks to reach a conclusion by year-end.

“For the first tine there is wide consensus among the G20 members on the necessity of having a new international taxation system,” Le Maire said.

“We have to address the issue of digital companies making profits in many countries without any physical presence, which means without paying the due level of taxes,” he said.

“And we also have to address the key question of minimum taxation and the risk of having a race to the bottom on taxation,” he said.

The OECD wants to agree on technical details of such a tax by July.

“There is a consensus to build a solution by the end of 2020,” Le Maire said, noting the alternative – no agreement – would create a proliferation of different tax systems making life more difficult for companies.

“Lets be clear – either we have at the end of 2020 an international solution… clearly in the interest of all countries and digital companies, or there is no solution and … then it will be up the national taxes to enter into force,” Le Maire said.

“Instead of having one single, simple solution, we would have many different digital taxes, all over the world.”

The United States, home to most of the digital giants, has been wary of committing to a solution on taxing them before a presidential election later this year.