U.S. nears deals with countries on eliminating digital taxes

The Biden administration said it’s close to securing agreements from a number of countries on withdrawing their so-called digital service taxes, further clearing the path to a new global tax regime and avoiding a potentially damaging set of trade spats.

U.S. Treasury Department officials, speaking on a call with reporters Monday, said they were hopeful the deals would be struck in time for the Oct. 30-31 Group of 20 summit in Rome where world leaders are expected to endorse a new global tax agreement.

The U.S. moved closer last week to securing those agreements on the sidelines of tax talks shepherded by the Organization for Economic Cooperation and Development. The broader negotiations last week took significant steps toward a deal that would set a global minimum tax rate and create a new system for sharing the taxes imposed on the largest multinational companies based, in part, on where they operate instead of where they book profits.

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The tablet and smartphone apps for Google, Amazon, Facebook and the Apple Store.

Before the tax-sharing agreement came into reach, several countries had imposed unilateral taxes targeting large technology companies that generated revenue in their countries without establishing a significant physical presence.

Washington has considered these discriminatory against U.S. firms, given that many of the biggest tech companies — like Facebook Inc. and Alphabet Inc.’s Google — are based in the U.S. The Biden administration in June retaliated with tariffs against Austria, India, Italy, Spain, Turkey and the U.K., but simultaneously delayed their implementation to allow time for negotiations.

The larger tax deal outlined last week prohibits signatories from imposing new digital service taxes after Oct. 8 and urges countries to come to agreements on rolling back existing DSTs.

Exactly how abolishing digital levies is articulated with the new rules will be determined in a so-called multilateral convention to implement the OECD deal. The organization is already working on that legal text, but many details are unclear, including how many countries would need to ratify it to bring it into force.

A French finance ministry official said Monday that all parties recognize this makes implementing the deal in 2023 a very ambitious objective.

The U.S. tariff suspensions expire in the second half of November, the Treasury officials said, helping to add a sense of urgency to ongoing talks. The officials offered no specifics on which countries were closest to striking deals with the U.S.

— With assistance from William Horobin

Bloomberg News
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