Mnuchin Warns U.K., Italy Over Digital-Tax Plans -- Update
January 21 2020 - 10:21AM
Dow Jones News
By Greg Ip
DAVOS, Switzerland -- Italy and Britain will face U.S. tariffs
if they proceed with a tax on digital companies such as Alphabet
Inc.'s Google and Facebook Inc., U.S. Treasury Secretary Steven
Mnuchin warned.
Mr. Mnuchin issued the warning after France agreed to delay the
imposition of its own digital tax in the face of threats of steep
U.S. tariffs on French exports. Mr. Mnuchin said French President
Emmanuel Macron agreed to hold off on the tax through the end of
the year while the two countries work out a permanent
resolution.
The truce is "the beginning of a solution," Mr. Mnuchin said an
interview with The Wall Street Journal at a Journal-sponsored event
on the sidelines of the World Economic Forum in Davos.
France announced the tax last year as a way of collecting
revenue from web-based companies that pay little or no tax on
substantial sales in France. Italy's parliament passed a similar
tax last year that was set to take effect this year. Britain is
scheduled to implement a similar tax this year.
Mr. Mnuchin said the U.S. was clear it thought France's digital
tax was an unfair levy on gross revenue and hoped Britain and Italy
would suspend their plans. "If not they'll find themselves faced
with President Trump's tariffs. We'll be having similar
conversations with them."
Countries working through the Organization for Economic
Cooperation and Development recently arrived at a plan for
apportioning taxes paid by multinational companies on activity that
spans borders and isn't easily captured by existing income tax
schemes, including digital activity. The U.S. has signaled it
objects to the plan but supports a mechanism to resolve global tax
disputes that would give multinational companies a safe harbor.
With a "phase one" trade deal with China in place, Mr. Mnuchin
said phase two wouldn't necessarily be a "big bang" that removes
all existing tariffs. "We may do 2A and some of the tariffs come
off. We can do this sequentially along the way."
Mr. Mnuchin also said the Trump administration would propose a
new middle-class tax cut later this year. "We are working on what
we call tax cut 2.0...which will be additional middle-class tax
cuts. We are in the process of designing it and will be rolling it
out shortly." Mr. Trump is set to deliver his State of the Union
address early next month. The administration's budget is expected
to follow shortly afterward.
Mr. Mnuchin said the U.S. would run deficits of about $1
trillion for the next two years, because of some provisions of the
tax cut such as expensing of investment, and increased government
spending agreed to as part of an agreement with congressional
Democrats. But "I'll stick with my projections that the tax deal
will pay for itself," he said.
At a separate panel Tuesday, Mr. Mnuchin said the Trump
administration will focus this year on efforts to deregulate energy
pipelines and infrastructure as part of a broader effort to boost
U.S. economic growth.
He also said that while regulators are monitoring rising
corporate debt levels, corporate leverage doesn't pose a major risk
to the U.S. economy. The biggest risk to the outlook is political,
he said, adding that some Democratic presidential candidates would
likely support stricter regulation that would dramatically change
the economic outlook.
Kate Davidson contributed to this article.
Write to Greg Ip at greg.ip@wsj.com
(END) Dow Jones Newswires
January 21, 2020 10:06 ET (15:06 GMT)
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