WASHINGTON (Reuters) – U.S. Treasury Secretary Steven Mnuchin decided to pull out of negotiations on digital services taxes with European Union officials after they failed to make any progress, U.S. Trade Representative Robert Lighthizer said on Wednesday.
Lighthizer told U.S. lawmakers that he still believed an international regime was needed to deal with taxation, but the talks with European countries were not proving fruitful.
“We were making no headway and the Secretary made the decision that … rather than have them go off on their own, you would just say we’re no longer involved in the negotiations,” he said during a hearing of the House Ways and Means Committee.
A Treasury spokeswoman had no immediate comment.
Lighthizer’s comments marked the first official confirmation of a report earlier by the Financial Times, which said Mnuchin had called for suspension of the talks in a June 12 letter to top officials in France, Spain, Britain and Italy.
Lighthizer this month launched investigations to determine whether digital services taxes being adopted or considered by 10 countries – Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey and Britain – amounted to unfair trade practices. If it finds they do, the U.S. government could impose new tariffs.
Washington previously initiated action against France for its digital services tax, but France later agreed to its suspend collection while Organization for Economic Co-operation and Development (OECD) countries worked out a more standardized approach.
Digital taxes are seen by some countries as a way to raise revenue from the local operations of big tech companies such as Alphabet Inc’s Google and Facebook Inc. Critics argue that the firms profit enormously from local markets but make only limited contributions to public coffers.
Spain insists the digital tax it is considering does not discriminate by country and will apply to companies regardless of where they are headquartered.
“Spain believes it’s necessary to adapt its fiscal system to the new economic reality of the 21st century; that was our position before receiving the letter, and continues to be so now,” a government source told Reuters.
Reporting by Andrea Shalal; additional reporting by Clara-Laeila Laudette in Madrid; Editing by Chizu Nomiyama