U.S. warns of possible counter-measures against Czech digital tax

The Czech Republic could face U.S. counter-measures if it introduces a planned 7% digital tax aimed at global internet giants, the U.S. embassy in Prague said on Friday, after the Czech parliament gave initial support to the new tax.

Several European countries are considering such a tax to raise more money from the local businesses of companies such as Google and Facebook, leading the United States to threaten retaliation in support of its tech industry.

Britain has said it will press ahead with its proposed digital tax, while France has put off its plans to wait for broader negotiations within the Organisation for Economic Cooperation and Development (OECD).

The Czech lower house approved the first reading of the digital tax bill on Wednesday. The bill must pass two more readings and clear the upper house Senate - or a new vote in the lower house in case of a veto - before it becomes law.

“The U.S. government has been clear on the issue of digital services taxes, or DSTs,” the U.S. embassy said in a statement, referring to past comments by the ambassador as well as U.S. Treasury Secretary Steven Mnuchin in Davos this week.

U.S. Ambassador to the Czech Republic Stephen King wrote in December in a newspaper article that the Czech digital tax was discriminatory. “Another regrettable consequence (of this tax) could be some form of appropriate counter-measure by my government,” King wrote.

The embassy declined to comment further.

Some European Union countries are pursuing their own digital taxes after failure to reach a bloc-wide agreement. Britain and the Czech Republic have said their proposed taxes are only temporary until global rules are agreed.

The planned Czech tax covers revenue from targeted advertising, digital market places, and user data sales.

It targets companies with annual global revenue over 750 million euros ($832 million), turnover of more than 100 million crowns ($4.3 million) in the Czech market, and more than 200,000 user accounts.

The Czech tax would raise about 2.1 billion crowns this year if it took effect from June, and about 5 billion annually in following years.