US Drops Tariff Threat Against Digital Tax Nations • The Register

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The US government and administrations in Europe have reached an agreement that will remove the threat of tariffs in response to policies on digital service taxes (DST).

The Treasury Department said the deal would mean Austria, France, Italy, Spain and the UK could keep their DSTs while multinational rules negotiated with the Cooperation and Development Organization (OECD) would be introduced.

In June, countries where taxes on digital services were deemed to disproportionately affect the U.S. tech industry were threatened with 25% tariffs on up to $ 2 billion of their products by the U.S. representative’s office. to trade (USTR). At the same time, he announced an immediate 180-day tariff suspension so that G20 and OECD countries have time to complete their negotiations on a global tax law, which would also hit tech companies.

The USTR’s announcement follows a year-long investigation into DST. The investigation concluded, according to the USTR Notice of Initiation [PDF] for tariffs, that DSTs “diverge from the standards reflected in the US tax system and the international tax system.”

Earlier this month, the OECD finally approved its plan on global tax laws that could cause big tech to pay more, no matter where they operate.

Encompassing 136 countries and jurisdictions and 90 percent of global GDP, the plan imposes a minimum tax rate of 15 percent on corporate profits from 2023 on large multinational companies, the OECD said. The United States, United Kingdom, China, India and all countries of the European Union are among the participants.

The aim of the deal is to deter large corporations – including tech giants – from shifting profits from certain countries to low-tax tax havens and avoiding levies. However, the minimum tax rate of 15% will only apply to companies with an annual turnover exceeding 750 million euros.

But it was enough for the United States to suspend its threat of tariffs for certain countries until the new rules of the OECD come into force.

US Ambassador Katherine Tai said in a statement: “I commend Austria, France, Italy, Spain and the UK for responding to US concerns about unilateral taxes on digital services.

“We entered into our DST deal in conjunction with the landmark OECD global deal that will help end the race to the bottom in corporate taxation by leveling the playing field for corporate taxation. companies. “

The UK government said of the move:

The US deal to lift the tariff threat does not include other countries that have imposed taxes on digital services like India and Turkey.

Questions remain about how tech companies will react to the OECD rules. If the story is something to follow, it will depend. In August, eBay assured the 300,000 third parties that use its online marketplaces that it would continue to absorb the UK government’s digital services tax rather than pass it on, for example.

However, its big rival Amazon has said that daylight saving time will be passed on to traders. We’re pretty sure they’re going to cut them down now, aren’t we Jeff? ®


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