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U.S. Ambassador warns Czech Republic not to approve digital ‘GAFA tax’

Prague, Czech Republic – U.S. Ambassador in Prague Stephen King warned Czech officials not to pass a so-called ‘GAFA tax’ on large internet companies.

U.S. threatens Czech Republic with counter-measures

In a letter sent to the Czech Chamber of Deputies, cited by local business daily Hospodarske Noviny, Washington’s top envoy to the Czech Republic told lawmakers that the tax was “discriminatory” and unfairly targeted U.S. businesses and that, if passed into law, could prompt the U.S. administration to take retaliatory measures against the Czech Republic.

Stephen King (no relation with the famous thriller author) urged Czech lawmakers to postpone the move and wait until an international agreement is found at the OECD level.

According to Radio Prague, a number of Czech businesses and exporters have also expressed their concerns regarding the digital tax, fearing it might deal a significant blow to bilateral economic relations between the U.S. and the Czech Republic, and urged Prime Minister Andrej Babis not to implement the GAFA tax.

This isn’t the first time Washington has urged Prague not to pass its planned tax on digital giants. A few weeks ago, Treasury Secretary Steven Mnuchin had already reiterated that the U.S. wouldn’t hesitate to take retaliatory action if the digital tax was approved by the Czech Parliament and signed into law by President Milos Zeman.

What is the Czech Republic’s ‘GAFA tax’?

Officially approved by the government last November, the scheme would implement a 7% tax on revenue from targeted advertising, user data sales and digital market places for large internet companies with a global turnover of €750 million, a domestic revenue of at least 100 million Kc (around €4 million) in the Czech Republic and more than 200,000 users.

The tax, which could bring in 5 billion Kc (around €195 million) to state coffers every year according to government estimates, would apply to tech giants known as GAFA – Google, Facebook, Amazon and Apple – as well as large collaborative platforms like Airbnb and Uber operating in the Czech Republic.

The Czech Republic counts among the few European countries to have moved to introduce such a tax on internet companies after multilateral talks at the EU and OECD levels collapsed.

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