New Trade Battle Over Taxes

In a statement Friday, the company said it had filed a letter of intent with the State Department to claim an old North American Free Trade Agreement (NAFTA) under the US-Mexico-Canada accord.

The company said it aims to offset “economic damage resulting from the revocation of presidential approval of the Keystone XL project,” adding that it was “as a result of the US government’s breach of its NAFTA obligations.” suffered a loss of more than $ 15 billion.

Washington Insider: New Trade Dispute Over Taxes Tax

With the civil aviation disputes with the European Union and the UK “settled” through an agreement between the three parties not to take trade for five years, attention with Europe, and now Canada, shifts to another trade problem that may be even more difficult to resolve find a solution.

Digital taxes are likely to be a new trade front, even if the US has signaled that it will not take action on trade like its predecessors in the Trump administration. And that now affects the US Treasury Department, not just US Trade Representative Katherine Tai.

A group of 20 Treasury Ministers (G20) is meeting in Vienna this week, and Bloomberg reports: “Treasury officials on Tuesday called reporters on Tuesday that a potential digital tax proposal conflicted with a deal last week that aims to abolish so-called digital service taxes. ” The US has signaled that it does not endorse several countries’ digital tax plans, arguing that it discriminates against US companies.

European countries are being pressured by several governments within the EU to tax global technology companies. While European countries believe that the new plan would be in line with the international agreement on taxes on digital services, the US counter that a decision cannot be made until the international agreement is concluded and its full text, expected in October, is ready .

Last week, the Organization for Economic Co-operation and Development (OECD) drew up an agreement with 130 countries and legal systems that includes the establishment of a minimum rate for companies. There are also rules under the deal that would “share the booty of multinational corporations,” according to Bloomberg. And the deal also included a provision to prevent new laws trying to impose taxes on cross-border digital sales.

But although the international agreement would provide for a minimum tax of 15%, Bloomberg said the US is trying to raise that level, noting that the US has been targeting a rate of 21% on US corporations’ foreign profits.

One of the Treasury Department’s rapporteurs noted that that part of the package that would bring a redistribution of corporate taxes based on the location of the companies rather than just the location of their headquarters would require a multilateral treaty.

Therein lies another potential challenge for the US – a multilateral treaty requires a two-thirds majority in the US Senate. Given the 50:50 split between Democrats and Republicans and few, if any, Republicans willing to back a tax hike, the chances are slim that such a deal will be approved by the Chamber.

However, the Treasury Department argued that the US proposal on this front for tax redistribution was not just focused on digital companies, nor was it aimed at US companies.

G20 Treasury Ministers are also expected to pay renewed attention to the recovery from the COVID pandemic, and US Treasury Secretary Janet Yellen will urge other countries not to end fiscal support for measures to combat the virus and its economic impact.

Meanwhile, USTR Tai met with Canadian Commerce Secretary Mary Ng on Tuesday and urged Canada to abandon its proposed unilateral tax on digital services, Bloomberg said, citing an email statement from Tai’s office.

But their discussion didn’t stop there and included softwood and dairy products. This came about as part of the US decision to pursue a dispute settlement request under the one-year US-Mexico-Canada Agreement (USMCA).

And Tai has promised that the US would get its litigation briefcase back if countries chose to introduce border taxes related to climate change.

So we’ll see. The US may be shifting a little on the trade front and unwilling to just try to resolve old disagreements as it appears that other countries around the world may be trying to use this stance to their advantage, and this situation must be watched closely, believes Washington insiders.

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