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Spain's lower house to draft 3% digital tax on internet giants

FILE PHOTO: Spanish Budget Minister Maria Jesus Montero arrives for a cabinet meeting in Madrid, Spain, January 14, 2020. REUTERS/Susana Vera/File Photo

MADRID (Reuters) - Spain’s lower house voted on Thursday to begin drafting a 3% tax on revenues of internet giants, the latest of such moves by U.S. trading partners that has spurred a U.S. investigation and could lead to punitive tariffs.

The tax would apply to revenues booked locally by tech firms such as Facebook, Alphabet Inc’s Google, Apple and Amazon and would generate about 1 billion euros ($1.12 billion) in annual revenues for the state.

The U.S. Trade Representative’s office said on Tuesday it was launching a “Section 301” investigation into digital services taxes that have been adopted or are being considered by Spain and other U.S. trade partners.

“We are prepared to take all appropriate action to defend our businesses and workers against any such discrimination,” U.S. Trade Representative Robert Lighthizer said.

Finalising Spain’s legislation will take 3-4 months in light of the challenges in agreeing a final text faced by the minority government of Socialist Prime Minister Pedro Sanchez.

Spain’s tax would take effect only if Organization for Cooperation and Development (OECD) member states reach agreement to launch a joint digital levy - an effort to take better account of the rise of big tech companies that often book profits in low-tax countries.

“It is a transitional and provisional decision until a regulation is approved at international or at least European level,” Budget Minister Maria Jesus Montero told lawmakers.

If approved, the bill would apply a levy of 3% on the local digital revenue of companies with annual global sales of more than 750 million euros and at least 3 million in Spain, lining up with an European Union proposal on the matter.

France is among EU countries that have already passed a digital tax which it plans to apply this year regardless of whether there is progress towards an OECD-wide deal.

Reporting by Belen Carreño and Inti Landauro Editing by Andrei Khalip and Mark Heinrich

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