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France and UK offer concessions on digital tax after US tariff threat

The Treasury is offering to reduce the scope of its digital services tax if the US promises to come back to the negotiating table on a global proposal, it has emerged.

Alongside the finance ministers of France, Italy and Spain, the UK said in a letter to US Treasury secretary Steven Mnuchin it would “considerably ease the task of achieving a consensus-based solution and make a political agreement within reach this year”, Bloomberg reported.

Mnuchin sent a letter to ministers last week saying the US would be pulling out of discussions with the OECD on a global digital tax unless the four countries halted their independent levies.

US trade representative Robert Lighthizer later confirmed the US would push ahead with imposing additional tariffs on those countries if the plans went ahead.

A Treasury spokesperson said at the time: “We have always been clear that our preference is for a global solution to the tax challenges posed by digitalisation, and we’ll continue to work with our international partners to achieve that objective.”

The four nations are now offering to take a “phased approach” to taxing “automated” technology companies, according to the letter.

Washington has been at odds with countries such as France and Britain over their plans to impose digital service taxes, arguing they unfairly target American firms.

Critics say the companies profit enormously from local markets while making only limited contributions in corporation tax by keeping their headquarters overseas.

The UK’s levy centres on taking a percentage of sales from companies that operate search engines, social media websites and online marketplaces with revenues above £500m. It will come into effect next year.

French finance minister Bruno Le Maire said of Washington’s response last week: “This letter is a provocation. It’s a provocation towards all the partners at the OECD when we were centimetres away from a deal on the taxation of digital giants.”

A Treasury spokesperson did not immediately respond to a request for comment.

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