Britain, France, Italy and Spain suggested a "phased approach" to global digital taxation talks in a joint letter to the U.S. treasury secretary last week, which they said could open the way for a deal this year.

The four countries sent the letter to American Secretary Steven Mnuchin after he called for a pause in negotiations to update cross-border tax rules for the first time in a generation, which have been taking place at the Organisation for Economic Cooperation and Development (OECD).

The Trump administration was in the absence of a global deal with European countries while warning that the U.S. would retaliate if they move up with plans to impose new taxes on American big tech companies such as Amazon, Google and Facebook.

"We believe that a phased approach, initially focused on automated digital services, would ...make a political agreement within reach this year," Mnuchin's European counterparts said.

"It would also pave the way for possible transitional solutions to be discussed with the United States, notably with respect to existing or upcoming national digital service taxes," they added.

The European Union said on Thursday it could impose taxes on some American's big tech companies even without a global agreement by the year-end, after Washington quit talks and stoked fears of a new trade war.

The U.S. has threatened to impose trade tariffs on French Champagne, handbags and other goods after Paris created its own tax on digital giants last year.

Critics say the firms profit enormously from local markets while making only limited contributions to public coffers, but Washington says the taxes discriminate against U.S. firms and has opened trade investigations into the charges in several European countries.

French Finance Minister Bruno Le Maire on Thursday condemned as a "provocation" a call by the U.S. for a break in negotiations on how to tax digital giants internationally.

"The collapse of negotiations could set off an escalating trade war and saddle multinational corporations with vast new uncertainty over their future tax bills, at a time when the coronavirus has upended supply chains and business models worldwide," the New York Times reported.

Some 140 states are involved in the talks organised by OECD on the first major rewrite of global tax rules in a generation to bring them up to date for the digital era.

The talks aim to reach agreement by the end of 2020, but that deadline is now slipping out of reach with Washington's latest move and the U.S. presidential election in November.

The OECD said last month in an update on the talks' progress that staged process might be necessary, although a year-end deadline for a deal remained possible.

(With input from Reuters)