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U.S. threatens Czech Republic with retaliation over ‘GAFA tax’

Prague, Czech Republic – U.S. authorities have warned the Czech Republic of possible counter-measures if Prague approves a so-called ‘GAFA’ digital tax on large internet companies.

In a statement released on Friday, the U.S. embassy in Prague threatened the Czech Republic with retaliation if lawmakers introduce a 7% digital tax on internet giants such as Google, Amazon, Facebook and Apple (GAFA).

“The U.S. government has been clear on the issue of digital services taxes”, the statement read, referring to previous criticism from Treasury Secretary Steven Mnuchin and U.S. ambassador in Prague Stephen King.

Washington’s top envoy in Prague had previously slammed the proposed tax as discriminatory against U.S. companies. “Another regrettable consequence [of this tax] could be some form of appropriate counter-measure by my government”, he wrote in a newspaper article in December.

Last week, the Czech lower house of Parliament approved the first reading of the proposed ‘GAFA’ digital tax on internet giants. The plan had been approved by the government last November.

The scheme would introduce a 7% tax on revenues from user data sales, targeted advertising and digital market places. It would only apply to companies with a global turnover of €750 million, a domestic revenue of at least 100 million Kc (around €4 million) and more than 200,000 users. Large digital collaborative platforms, like Uber and Airbnb, could also be subject to the tax.

According to the government’s calculations, the new levy could bring in 5 billion Kc (around €195 million) to state coffers every year.

After talks regarding the introduction of a ‘GAFA’ tax collapsed at the EU and OECD levels, a handful of European countries have taken steps to implement their own temporary taxation scheme until an agreement is found at the international level.

While countries like France, Austria and the U.K. have also taken steps in that direction, the Czech Republic’s tax would be the most ambitious proposal in Europe.

Headed by Kafkadesk's chief-editor Jules Eisenchteter, our Prague office gathers over half a dozen reporters, editors and contributors, as well as our social media team. It covers everything Czech and Slovak-related, and oversees operations from our other Central European desks in Krakow and Budapest.