U.S. and Five European Nations Strike Deal on Digital Taxes

An international move to eliminate digital-service taxes has gained momentum on news of an agreement between the U.S. and five European countries with whom it was polarized in its fight to retire the digital tax. Such taxes affect Big Tech companies like Amazon, Apple, Facebook and Google. In all, 136 countries agreed to retool international corporate taxation at last week’s Fourth G20 Finance Ministers and Central Bank Governors meeting in Washington, D.C. The deal immediately bans adding any new digital taxes, although the timing to implement reversal of existing taxes remains unclear.

The agreement —  struck between the U.S. and France, Italy, the UK, Austria and Spain — is linked to a broader global tax agreement, namely the global minimum tax that the Biden administration and Treasury Secretary Janet Yellen have prioritized. The UK, France and Italy have been dug-in on retaining discretion to levy corporate income taxes on firms that rack-up revenue in their countries without a significant physical presence.

Speaking for the G-20 presidency, Italy’s finance minister Daniele Franco said in The Wall Street Journal that “by the end of 2023 or the beginning of 2024 the [rules] will be operational, and the agreement is that, at that point, the national taxes will be removed. Since the beginning, it has been established that the taxes would be removed when a world-wide solution would be implemented. So we expect national, unilateral taxes to be removed by 2024.”

Transitional arrangements, WSJ reports, “are being discussed expeditiously.”

The U.S. has advocated for speedy removal of the taxes, meeting European resistance. France, though Finance Minister Bruno Le Maire, said France “won’t remove its digital tax until the new tax is in force.”

Le Maire characterized as “good news” the fact that an agreement as to how to withdraw the digital tax was reached during the two day meet.  U.S. Treasury Department spokeswoman Alexandra LaManna said details will emerge in the coming days.

“This agreement should put an end to tax and trade disputes with our European allies that could hamper economic growth and business investment, and stop unilateral measures to pave the way for implementation of the 136-nation agreement,” LaManna said in WSJ.

Related:
Talks to Remove Digital Taxes Should End Tariff Risks – U.S. Treasury Officials, Reuters, 10/12/21