EU May Hit ‘Pause’ on Tax Talks

A European effort to update international tax rules has met such stiff opposition from the United States that some governments support waiting until after the American presidential election to try to finalize negotiations, according to an official familiar with the discussions.

Attempts to create a global minimum corporate tax and to give countries more latitude to impose levies on large multinational tech companies have already been delayed, but the push may stand a better chance of success next year should Democrat Joe Biden win in November, said two European officials, who asked not to be named discussing internal deliberations.

President Donald Trump has disrupted trans-Atlantic relations during his three and a half years in office, calling the European Union worse than China when it comes to trade and announcing a plan this week to withdraw 12,000 troops from Germany after repeatedly hectoring the ally over its defense spending. With the election less than 100 days away and Trump trailing in national polls, leaders are weighing whether sensitive negotiations may face fewer obstacles if a new administration takes office in January.

European countries have prioritized rewriting international tax regulations, in an attempt to make the rules consistent with a modern, digital economy in which companies don’t always have a physical presence where their products and services are used. But work at the Organization for Economic Cooperation and Development (OECD) has been bogged down by U.S. objections and delays due to the Covid-19 pandemic.

The OECD’s latest timeline would see it presenting the “blueprint” of an agreement by October, with finance ministers in the Group of 20 leading economies supporting a solution by the end of the year.

But given bipartisan sensitivities to tax issues, a Biden presidency doesn’t necessarily mean an easier path.

Pascal Saint-Amans, the OECD’s director for tax policy, said this month that the election may not change the dynamics of the talks, as both Democrats and Republicans have indicated objections to digital taxes. In the U.S., it’s seen as an attack on American companies, while in Europe it is seen as an attempt to get a fair share of tax, he said.

Germany, which currently holds the six-month rotating presidency of the European Union (EU) and sets the bloc’s policy priorities during that time, is one of the countries willing to wait on the tax portfolio until after the election, one of the officials said.

Discussions at the OECD on a global digital tax have become so chaotic that the EU has weighed tabling its own proposal, while countries including Austria, France, Italy, and the U.K. have already announced or implemented their own national levies.

While France’s tax has already taken effect, President Emmanuel Macron’s government temporarily suspended collecting the revenue until the end of the year. This month, the U.S., which says the levy unfairly targets American companies, announced 25 percent tariffs on a series of French goods worth about $1.3 billion in response to the French measures.

Copyright 2020 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.