Chamber warns against tax targeting tech companies

The U.S. Chamber of Commerce on Tuesday is raising concerns about digital services taxes, after the United Kingdom on Monday announced plans to move forward with such a tax on large technology companies.

“The American business community supports international dialogue on ways to modernize the international taxation system to adapt to changes in the global economy,” Chamber President and CEO Tom Donohue wrote in a letter to Treasury Secretary Steven Mnuchin. “However, unilateral European actions will erode trust and lessen the prospects for international agreement; indeed, we now see governments outside of Europe considering similar actions.”

The U.K. announced plans on Monday for large internet companies to pay a tax starting in 2020 of 2 percent of revenues from users in the country. A number of other countries have also been looking at imposing a digital services tax, due to frustrations that internet companies are largely untaxed in their jurisdictions.

But the tech industry and top policymakers in the U.S. have been critical of these efforts, which would largely impact companies based in the United States.

Donohue outlined three main concerns the Chamber has with digital services taxes.

The first is that proposals to tax revenues don’t take into account costs related to sales. “Such a turnover tax dissuades investment and discourages innovation and entrepreneurship,” he wrote.

The Chamber’s second concern is that the proposals appear to “improperly” target American companies. Donohue argued that “targeting specific companies or sectors would set a dangerous precedent.”

The Chamber’s third concern is that the group thinks that countries will be unlikely to lift their own digital services taxes after an international agreement is reached on the issue.

Mnuchin last week expressed concerns about unilateral taxes on U.S. tech companies, and the Chamber encouraged the Trump administration to continue to speak out against these efforts.

Donohue also urged Mnuchin to encourage his European counterparts to “collaborate on consensus measures that respond to taxation concerns without punitively targeting American firms in the process.”