The negotiations broke down because the Europeans have failed to develop as successful a digital economy and run a large digital economic deficit with the United States. They want to levy a tax against an American import to help this trade imbalance, while claiming it doesn't amount to a trade tariff. Given the amount of economic value at stake, of course the Americans are going to view it as an unjust trade tariff and fight against it, while the Europeans will view it as a fair and justified tax for value captured in their domestic market. The global minimum tax has mutual agreement, however, so don't use that to distract or straw-man non-existent disagreement, avoiding the real and essentially intrinsically zero-sum crux of the disagreement here.
So for purchases within Europe, the end consumer is already paying a 25% tax on the digital services provided by google.
But for good and services sold outside the EU, and remember that Europe have export driven philosophies, there is essentially no government revenue from foreign digital services.
Europe deserves compensation for buying American digital services in the same way America deserves compensation for buying German cars. It doesn't. Instead it needs to focus on a more competitive business environment where the money is cycled more times through the economy before ultimately making it's way to the government.
You've stated this as a fact, but it's not self-evident. There are obviously cases where some degree of "protectionism" makes sense. For example, you probably wouldn't want to let yourself get into a situation where another country supplies 100% of your food, if you could help it. As an extreme case, if you can produce all your food locally and it only makes your food 1% more expensive (than the tariff-less case), that's very likely a great trade-off.
Some degree of protectionism can make sense in certain circumstances. I'm not claiming it necessarily makes sense in this case (could very well be a terrible idea), but I think you'd need some evidence or reasoning behind the claim that it's definitely a bad thing for Europe.
A time will come when the US is not the global digital products leader. I surmise that the US will then be very much in favor of digital taxes.
That is undeniably one aspect of it. However, I think the other one is that digital services have become a larger part of the world economy and they are structurally unlike anything that existed when the current rules of taxation were devised.
Traditionally, services required people on the ground and local subsidiaries that were subject to taxation and regulation. For instance, you can't run banking and insurance services for European customers entirely from the US. Trade in goods always benefitted from geographic proximity as well, even without tariffs.
A situation where you can provide services to a huge number of customers on the other end of the world without any local representation or taxation of corporate profits (or other income) is historically relatively new and does in my view justify calls for reform of global taxation.
>They want to levy a tax against an American import to help this trade imbalance, while claiming it doesn't amount to a trade tariff.
Claiming that trade imbalances as such are somehow unfair and need to be remedied is in my view nonsense, but it is an idea popularised by Mr. Trump himself.
You can't have it both ways unless you accept that mercantilist power politics is all there is and neither enlightened self interest nor principles play any role whatsoever. I think we can do better than that.
I also think they should call this a digital tax or apply it only to digital services. I understand that’s where the biggest impact will be felt but a minimum corporation tax rate shouldn’t depend on business type and I dislike the idea people are free to target companies for being “too successful”.
Honest question: why? Why should Europe unite with the US against China?
I don't mean this as a challenge, I'm not trying to argue either way¸ I'm just curious about the reasoning behind your statement.
I don't think the US (or the EU) can change Chinese policies on a list of issues alone. At least not without a tonne of backlash at home over the economic results. So the EU (/US) (plus a list of othets) either need to unite on those issues or accept them happening.
The issues I'm thinking about are: Hong Kong, freedoms in wider China, treatment of minorities, coronavirus and the recent clashes in India (I don't want to take sides, I just want two nuclear powers to stop shooting at each other). You may disagree with one or more of these issues. But I'd be surprised if you think nothing on this list warrents at least some international pressure?
I'm more than happy to admit that none of the places I've listed are perfect. And we all have bones to pick with each other. But right now we're squabbling over very little while China sets up camps and deployed troops...
China is already harassing and sinking fishing vessels and trying to close the South China Sea. It may soon try to enforce an ADIZ over the SC Sea as well. Not great.
China is a growing aggressive power with cyber attacks across a multitude of countries and is running, like Russia, disinformation campaigns to undermine democracy.
It is in the interest of EU and the US, and indeed many countries, to have a rules-based international order. It is increasingly in the interests of the US as its power is in relative decline.
They will do so when someone more trustworthy appears, but that is not the case currently.
You can't get trust, if you just take all pre-existing agreements and throw it out of the window.
After, i'm not an expert so I can't say that the system pushed by EU is the best idea or not.
The talks are mainly about an additional 5% in taxes on the European profits of Facebook, Google, Apple, Netflix, or Amazon.
How does a small tax increase for highly profitable companies get into the way of standing together against China?
Does the U.S. and silicon valley want to continue to manoeuvre and lobby to exempt tech companies from tax dues on revenues generated from digital attention and data gathered from users overseas?
And if so, does TikTok have to pay tax dues in return for similar revenues generated from U.S. user data?
The short-term balance sheet benefit to tech companies from avoiding overseas taxes seems understandable, but the longer-term implications of setting a precedent like that on an international stage seem less clear to me.
Because of Trump, US allies have to guard more corners than before. It's a serious problem and I think Trump is actually giving Russia/China an unfair advantage.
He has already destroyed the Asian partnerships against China that Obama started, he also got out of numerous Western partnerships because it wasn't his signature on it.
I would say that the problem is not Europe, it's 100% Trump. Allies won't back him since they can't trust him. Everyone knows he's trying to have as much as personal gain as possible. Even meddling in European affairs,. Eg. Ukraine for the clear sake of money).
Every time Trump suggests to help countries handle their affairs, you know he's going for the "pay Trump, get US military assistance" card, it's nuts.
The Western alliance since WO II can't survive in it's current form if Trump would get another term, they are all waiting till someone sane comes back. If it doesn't happen, it will become a serious problem :(
TLDR; If you wouldn't trust Trump as a business partner, how can other countries trust him. You can't unite/partner with a person like that.
Edit: if down vote. Please share something that Trump seems trustworthy without personal gain. I haven't seen any situation during his entire term, trying to redirect US-money to his pockets.
China on the other hand will eclipse the US significantly both economically and militarily, reshaping the world.
If you don't know what or where he will be next, how do you counter him?
Reagan kept the Soviet Union off balance to the point of dissolving it. He's considered one of America's greatest statesman today, but called a clown by the elites at the time.
The CCP should be concerned about the same fate if they trifle with Trump. They have given every reason for him to isolate that country.
Can't see a reason why they wouldn't pursue this objective except US's objection, now the relation had soured anyway.
