The United States officially protested against a Czech proposal to introduce a 7-percent digital tax on tech giants such as Facebook, Google and Amazon, Czech TV reported.
The protest from the US came after the Czech Chamber of Deputies supported the government’s proposal to introduce a digital tax on Wednesday.
If the law came into force, internet companies with a global turnover of over €750 million and an annual turnover of at least 100 million korunas (€4 million) would be subject to a 7-percent digital tax.
Czech Foreign Minister Tomáš Petříček said he recently discussed digital taxation with U.S. Ambassador Stephen King.
“I understand that the United States perceives this negatively. On the other hand, we are trying to explain that this step is only temporary until an international solution is found,” the minister said.
Rumors about the U.S. response to the Czech digital tax had already been circulating in Czech media, with an anonymous source from the U.S. government telling the Czech daily Hospodářské noviny that the U.S. warned the Czech Republic that introducing the tax could trigger countermeasures.
Petříček has now confirmed the information that appeared in the Czech media at the beginning of the week was true.
Washington considers the proposal a from of competitive discrimination against U.S.-based firms. The United States is going through a similar dispute with France, which recently has introduced a similar 3-percent tax.
Czech Finance Minister Alena Schillerová (ANO) then said in Brussels on Tuesday that she was not afraid of any U.S. retaliation. According to her, the Ministry of Finance discussed the matter with the U.S. Embassy as well.
Schillerová added that she had no official information that the U.S. was preparing any countermeasures. According to her, the tax is not aimed at U.S. companies but will also affect others that exceed the thresholds set by law.
European countries already resorting to digital taxes
Already in 2017, representatives of the European Union spoke about digital tax for large internet companies such as Facebook or Google.
The following year, the European Commission presented proposals for changes in the taxation of digital companies, but the finance ministers of the EU Member States then failed to find a consensus on the possible form of a future tax.
Some countries, including the Czech Republic, have therefore decided to act on their own. France, Italy, and Austria have all introduced a digital tax as well.
To deter these digital taxes, Washington threatened to impose custom duties on certain goods from France. France then proposed postponing the April tax due date until the end of the year.
Despite the U.S. stance, President Donald Trump has previously said in the past that Amazon does not pay enough tax. In the U.S., the tech company paid $0 in taxes in 2018.
In the Czech Republic, the digital tax would also apply to digital economy platforms such as Airbnb or Uber. If the Czech Parliament manages to discuss and approve the new law, the digital tax could come into force by the end of this year.