Lighthizer: U.S. no longer involved in global digital tax talks

The U.S. has pulled out of global negotiations about digital services taxes, U.S. Trade Representative Robert Lighthizer said Wednesday.

A host of countries have adopted or proposed digital services taxes that would largely impact U.S. tech giants such as Facebook, Amazon and Google. U.S. policymakers oppose countries imposing these types of taxes unilaterally, saying they unfairly target American companies, and had been participating in talks as part of the Organization for Economic Cooperation and Development [OECD] in an effort to reach a multilateral agreement.

During a House Ways and Means Committee Hearing Wednesday, Lighthizer said that the U.S. was making “no headway” during talks, and that Treasury Secretary Steven Mnuchin decided that “rather than have [other countries] go off on their own, he would just say we’re no longer involved in the negotiations.” 

Monica Crowley, a spokesperson for the Treasury Department, said in a statement later in the day that the “United States has suggested a pause in the OECD talks on international taxation while governments around the world focus on responding to the COVID-19 pandemic and safely reopening their economies.”

Later in the day, Lighthizer said at a Senate Finance Committee hearing that other countries are “completely dug in on this,” and that Mnuchin is telling other countries that “if you all think you’re going to get a consensus around taxing our companies unfairly, we’re not going to be a part of it.”

Lighthizer said he still thinks there needs to be a solution on digital taxes. “I don’t think that what happened at the OECD was the end of a process of trying to work out a solution,” he said.

Lighthizer’s comments come after the Financial Times reported Wednesday that Mnuchin had sent a letter to four European finance ministers this month that talks are at an “impasse.” Mnuchin called for talks to be suspended but suggested that the discussions be resumed later this year, according to the Financial Times article.

The USTR office announced earlier this month that it is opening investigations into digital taxes that have been adopted or under consideration in a number of trading partners, including Italy, the United Kingdom and the European Union. If the investigations find that the taxes are discriminatory and burden U.S. Commerce, the U.S. could impose tariffs. 

Last year, USTR found that a digital tax adopted in France is discriminatory, and proposed tariffs of up to 100 percent on $2.4 billion of French products. The U.S. and France then reached a deal under which the U.S. agreed to hold off on tariffs and France has paused its tax while the OECD talks proceeded.

Lighthizer’s comments about digital tax talks at the Finance Committee hearing came in response to a question from the committee’s top Democrat, Sen. Ron Wyden (Ore.). Wyden said that digital services taxes would “hit our companies like a wrecking ball” and asked how the administration plans to protect U.S. companies.

Finance Committee Chairman Chuck Grassley (R-Iowa) said during the hearing that he thinks reaching an agreement with the OECD would be the “best outcome” for resolving the digital tax issues but that discussions shouldn’t be rushed during the coronavirus pandemic.

“It’s better to take time necessary to get a fair and equitable solution,” he said.

Grassley said he supports Treasury “continuing to negotiate on these important global tax issues and working towards an agreement that does not disproportionately and adversely affect U.S. businesses.” He also said he continues to be opposed to countries acting on their own.