Cryptocurrencies, digital tax top the agenda for G-7 meeting

Technology
Steve Mnuchin

Treasury Secretary Steve Mnuchin takes questions as he speaks during a news briefing at the White House, in Washington, Monday, July 15, 2019. (AP Photo/Carolyn Kaster)

PARIS (AP) — Finance officials from the Group of Seven rich democracies will weigh risks from new digital currencies and debate how to tax tech companies like Google and Amazon when they meet this week in the Paris suburb of Chantilly.

Those two issues, raised by the impact of the digitalization on the world economy, are at the top of the agenda for the gathering Wednesday and Thursday, hosted by French Finance Minister Bruno Le Maire and including U.S. Treasury Secretary Steven Mnuchin.

Hanging over the ministers as they hold a working dinner Wednesday in the chateau at Chantilly: slowing global growth and the America-first trade policies of U.S. President Donald Trump that have led to a tariff war with China and tensions with Europe. The G-7 includes European countries Germany, France, Britain and Italy, plus Canada and Japan.

Europe and the U.S. have exchanged a limited number of tariffs but Trump has threatened more damaging ones on European auto imports in an attempt to renegotiate overall trade relations. The talks have been slow as the two sides differ on whether agricultural as well as industrial products should be included. The U.S. wants to include farm products and the Europeans do not.

Those disagreements could be exacerbated by a newer point of contention: host France’s decision to impose a 3% tax on revenues of giant tech companies, which are mainly American. These companies do huge business across Europe but pay taxes only in the EU state where their local headquarters are based, often a low-tax haven like Luxembourg or the Netherlands. The result is they pay a far lower rate than traditional businesses.

The U.S. has advocated a broader international approach being developed by the Organization for Economic Cooperation and Development, a Paris-based international organization representing much of the more developed world.

U.S. officials have said they’re investigating the French move as a possible unfair trade practice that could lead to retaliation. Mnuchin told journalists Monday that “this will definitely be high on the agenda.” French officials say they are open to the OECD approaches and hope their move will spur action.

Where the U.S. will find more common ground with its G-7 partners will be in its mistrust of cryptocurrencies like Facebook’s recently announced Libra. Mnuchin said the U.S. Treasury Department has “very serious concerns that Libra could be misused by money launderers and terrorist financers… This is indeed a national security issue.” Le Maire has voiced similar concerns and has commissioned a report by top central bankers.

Libra would be based on distributed technology similar to that which underpins Bitcoin, but with key differences. Bitcoin’s value fluctuates, limiting its use to pay for things. In contrast, Facebook hopes to keep the value of the Libra fairly steady by tying it to a basket of major currencies. The social network envisions it as a way to send money around the world without significant fees. Facebook won’t run Libra directly but instead is setting up a nonprofit with its partners to oversee the new currency.

A broader issue is the state of international cooperation represented by the G-7 itself. The finance ministers’ meeting will prepare the ground for a full G-7 summit of heads of state and government in Biarritz in southern France in August.

Trump has disrupted earlier summits by refusing to sign on for final statements, which traditionally summarize the group’s shared views on key issues like global warming. U.S. officials have also spiked earlier language explicitly rejecting trade protectionism such as tariffs. After last year’s G-7 hosted by Canada, Trump retracted U.S. support for the meeting’s joint statement and tweeted criticism of the host, Prime Minister Justin Trudeau, as “very dishonest and weak.”

Mnuchin said the meeting could end with a chairman’s report of the discussion rather than a final statement signed by all, depending on a decision by the host country.

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McHugh contributed from Frankfurt, Germany. Martin Crutsinger in Washington and Kelvin Chan in London contributed to this report.

Copyright 2019 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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