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Sunak urges US to back digital services tax

The coronavirus crisis has made tech firms “more powerful and more profitable”, the chancellor said in a letter signed by European counterparts.

The letter from Rishi Sunak and finance ministers in France, Italy and Spain says tech giants, like Google, Amazon and Facebook, need “to pay their fair share of tax”.

International talks are taking place over how online sales should be taxed.

But on Wednesday, the US said it had walked away from the negotiating table.

Ganging up on America

The US Trade Representative Robert Lighthizer told Congress the US had abandoned efforts to find a multilateral solution to taxing tech firms in talks overseen by the Organisation for Economic Cooperation and Development (OECD).

He said other nations had ganged up to “screw America”.

In the letter, obtained by the BBC, the four finance ministers told the US Treasury Secretary, Steven Mnuchin, that the pandemic had increased the need for such levies.

“The current Covid-19 crisis has confirmed the need to deliver a fair and consistent allocation of profit made by multinationals operating without – or with little – physical taxable presence,” the letter said.

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“The pandemic has accelerated a fundamental transformation in consumption habits and increased the use of digital services, consequently reinforcing digital business models’ dominant position and increasing their revenue at the expense of more traditional businesses.”

The letter continues: “Digital giants, no matter where they are headquartered, will emerge from the current crisis more powerful and more profitable.”

“These companies benefit from free access to the European market. It is fair and legitimate to expect that they pay their fair share of tax within countries where they create value and profit.”

The finance ministers’ letter says a solution is still possible this year.

Without it, and with promises from the European finance ministers to push ahead with their taxes, a tit-for-tat trade war could be in the offing, in the middle of a severe global recession, caused by the pandemic.

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