After France Truce, U.S. Faces New Tax Threat in EU

(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Having just persuaded France to hold off on a digital tax that would hurt its biggest technology firms, the U.S. is facing a similar threat from another part of Europe.The Czech Republic is debating plans to impose one of the world’s highest levies on global internet companies -- albeit as a stop-gap measure -- brushing aside possible U.S. retaliation.The initiative comes as transatlantic trade tensions once again bubble over. Shortly after agreeing on the truce with France, President Donald Trump’s tone changed as he complained that Europeans are “more difficult to do business with than China.”Cars are another bone of contention. Commerce Secretary Wilbur Ross said this week at the World Economic Forum in Davos, Switzerland, that the U.S. was still considering slapping levies on European auto imports, even as it hopes for a “peaceful resolution” of differences.Czech Foreign Minister Tomas Petricek said Thursday that he’s aware of the risks in imposing the 7% levy, which would target local revenue because the majority of profits are booked and taxed in other jurisdictions.“I understand the United States perceives this negatively,” he said in televised comments. “We’re trying to explain that this step is only temporary until an international solution is found.”Petricek met U.S. Ambassador Stephen King after the envoy wrote an newspaper opinion piece saying America may respond with proportional countermeasures against the Czech Republic.U.S. firms have paid very little in Czech tax in recent years.Google Czech Republic s.r.o. recorded a net profit of 15.9 million koruna ($835,000) in 2018, paying 8.8 million koruna in tax, according to a regulatory filing. That same year, Amazon Czech Republic Services s.r.o. booked a profit 19 million koruna and paid 9.7 million koruna of income tax.Billionaire Czech Prime Minister Andrej Babis is trying to impose the digital tax alongside higher levies on gambling, alcohol and tobacco to boost public-sector wages and fund welfare spending. He’s previously enjoyed warm relations with Trump.Other European countries that have introduced a similar tax or are planning to do so include the U.K., Italy and Austria.France agreed this week to delay collecting its 3% digital levy until the end of the year to avoid the threat of higher U.S. tariffs. The two countries said they’d made progress toward a global pact on the taxation of digital services.(Corrects 11th paragraph to remove Denmark from countries considering tax.)\--With assistance from Lenka Ponikelska.To contact the reporter on this story: Krystof Chamonikolas in Prague at [email protected] contact the editors responsible for this story: Blaise Robinson at [email protected], Michael WinfreyFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P. Read More...

(Bloomberg) — Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here.

Having just persuaded France to hold off on a digital tax that would hurt its biggest technology firms, the U.S. is facing a similar threat from another part of Europe.

The Czech Republic is debating plans to impose one of the world’s highest levies on global internet companies — albeit as a stop-gap measure — brushing aside possible U.S. retaliation.

The initiative comes as transatlantic trade tensions once again bubble over. Shortly after agreeing on the truce with France, President Donald Trump’s tone changed as he complained that Europeans are “more difficult to do business with than China.”

Cars are another bone of contention. Commerce Secretary Wilbur Ross said this week at the World Economic Forum in Davos, Switzerland, that the U.S. was still considering slapping levies on European auto imports, even as it hopes for a “peaceful resolution” of differences.

Czech Foreign Minister Tomas Petricek said Thursday that he’s aware of the risks in imposing the 7% levy, which would target local revenue because the majority of profits are booked and taxed in other jurisdictions.

“I understand the United States perceives this negatively,” he said in televised comments. “We’re trying to explain that this step is only temporary until an international solution is found.”

Petricek met U.S. Ambassador Stephen King after the envoy wrote an newspaper opinion piece saying America may respond with proportional countermeasures against the Czech Republic.

U.S. firms have paid very little in Czech tax in recent years.

Google Czech Republic s.r.o. recorded a net profit of 15.9 million koruna ($835,000) in 2018, paying 8.8 million koruna in tax, according to a regulatory filing. That same year, Amazon Czech Republic Services s.r.o. booked a profit 19 million koruna and paid 9.7 million koruna of income tax.

Billionaire Czech Prime Minister Andrej Babis is trying to impose the digital tax alongside higher levies on gambling, alcohol and tobacco to boost public-sector wages and fund welfare spending. He’s previously enjoyed warm relations with Trump.

Other European countries that have introduced a similar tax or are planning to do so include the U.K., Italy and Austria.

France agreed this week to delay collecting its 3% digital levy until the end of the year to avoid the threat of higher U.S. tariffs. The two countries said they’d made progress toward a global pact on the taxation of digital services.

(Corrects 11th paragraph to remove Denmark from countries considering tax.)

–With assistance from Lenka Ponikelska.

To contact the reporter on this story: Krystof Chamonikolas in Prague at [email protected]

To contact the editors responsible for this story: Blaise Robinson at [email protected], Michael Winfrey

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