US: US, five European countries extend truce over digital taxes until mid-2024

The U.S. and five European countries agreed on Thursday to extend a trade truce over digital services taxes for six months to buy more time for negotiations on international taxing rights over large, highly profitable corporations.

A joint statement issued by the U.S. Trade Representative’s office and Austria, Britain, France, Italy and Spain said that an October 2021 deal to suspend the threat of U.S. retaliatory tariffs over unilateral digital services taxes would be extended until June 30. It had previously been scheduled to expire at the end of 2023.

The original agreement represented a compromise under which the five countries would get to keep their digital taxes in place and on hold until the “Pillar 1” global tax deal was implemented. Tax liabilities would still be accrued and credited against the new regime, which aims to allow countries to tax the excess profits of about 100 mainly large technology companies based on where activity takes place, not the headquarters location.

But those talks have proven more complicated than initially anticipated, causing an end-2023 implementation deadline to be extended.

USTR had previously threatened 25% tariffs on over $2 billion worth of imports from the five European countries and Turkey, from cosmetics to handbags, after its “Section 301” investigation concluded that the digital services taxes were discriminatory and aimed largely at U.S. tech giants such as Facebook owner Meta, Google owner Alphabet, Amazon.com and Apple.

Thursday’s joint statement extends the status quo, aligning it with a December statement from G20 and OECD countries calling for the Pillar 1 text to be finalized by the end of March, with a signing ceremony by June 30.

Apart from revised dates, the language of the original October 2021 joint statement remains unchanged.