US Abolishes Punitive Tariffs: Progress on Global Minimum Taxes

The United States has waived punitive tariffs against five European countries in the dispute over national digital taxes. Thus an important condition for the application of the universal minimum tax was fulfilled.

The US Treasury has announced an agreement with France, Great Britain, Italy, Austria and Spain in a dispute over taxation of digital companies. The national digital taxes adopted in these countries will be converted into a new international tax system. 136 countries agreed to this at the beginning of October. The agreement provides for a minimum corporate tax rate of 15 percent.

“This allows for the termination of business actions that have been identified in response to digital taxes,” the US Treasury said. The ministry spoke of a “practical solution” and announced further talks in the context of a “constructive dialogue”. Digital taxes are particularly targeting US internet giants such as Facebook, Google and Amazon because companies, according to critics, pay very little tax in individual markets.

The United States had threatened countries with punitive tariffs as a result of the introduction of national digital taxes, but initially delayed its imposition in order to find an international solution.

Countries want to prevent tax competition

In July 2020, the United States initially threatened to impose punitive duties of 25% on $1.3 billion worth of French imports. Washington has argued that the French digital tax discriminates against US companies. Last June, US Trade Representative Catherine Taye announced tariffs on Great Britain, Italy, Austria, Spain, India and Turkey. In this case, too, the tariffs did not enter into force, but were initially suspended for six months in order to find time for an international solution.

Punitive tariffs imposed on France, Great Britain, Italy, Austria and Spain are now no longer on the table. The US Treasury has not provided any information on India or Turkey.

The new rules should come into effect in 2023

An agreement on global minimum taxes for large corporations was reached within the framework of the Organization for Economic Co-operation and Development (OECD). The agreement is expected to enter into force in 2023 and prevents a downward tax race between individual countries.

US Trade Representative Catherine Taye praised the compromise, but at the same time stressed: “We will continue to oppose unilateral taxation of digital services.” According to the “Europe Press” news agency, Spanish Finance Minister Maria Jesus Monteiro said that the agreement shows Spain’s desire to find an international consensus.