American Embassy warns Czechia over planned digital tax on big tech

The Czech government’s digital tax proposal, which is currently being discussed in the Chamber of Deputies, discriminates against American companies and will have an effect on their willingness to invest in the Czech Republic, the Czech News Agency reported on Wednesday, citing  the chargé d'affaires at the US Embassy in Prague, Jennifer Lynn Bachus. According to Ms Bachus, American state organs may resort to countermeasures if the bill is passed. 

The government proposal on a tax of digital services originally counted on a seven percent rate, but was eventually lowered to five percent. The tax is aimed at large multinational companies, such as Google and Apple, with a global revenue exceeding EUR 750 million, whose annual service revenue in the Czech Republic is at least CZK 100 million.

The planned state budget for 2021, already counts on extracting the tax, which the government estimates will bring in CZK 2.5 billion crowns.

However, according to Jennifer Lynn Bachus from the US Embassy, the proposed legislation discriminates against American companies and will weaken their willingness to invest in the Czech Republic. This, she said, will lead to Czech consumers being forced to dig deeper into their pockets as prices rise and investments fall.

Ms Bachus told the Czech News Agency that, if the tax law is passed, the US will investigate the matter further and possibly enact countermeasures.

She pointed to the US perception that this is a one-sided tax from the Czech side.

The Czech Ministry of Finance has said in the past that the government would be ready to end the tax if a solution was found on the level of the Organisation for Economic Co-Operation and Development.

However, Ms Bachus told the Czech News Agency that going ahead with the vote on issuing such a tax, while OECD negotiations are still underway, would be counterproductive.