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US waives punitive tariffs against five European countries in digital tax dispute

US waives punitive tariffs against five European countries in digital tax dispute

In the row over national digital taxes, the United States has waived punitive tariffs against five European countries.

The basics in brief

  • Background This is an agreement on global minimum taxes.

The US Treasury announced an agreement with France, Great Britain, Italy, Austria and Spain on Thursday. The digital taxes passed in these countries, targeting US internet giants such as Facebook, Google and Amazon in particular, were to be converted into a new international tax system agreed upon by 136 countries at the beginning of October which provides for minimum taxes on companies. 15 percent.

“This allows for an end to business actions established 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”.

In July 2020, the US initially threatened to impose punitive duties of 25% on French imports worth $1.3 billion (€1.1 billion). Washington has argued that the French digital tax discriminates against US companies. However, punitive tariffs were not put into effect.

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.

Now punitive tariffs on France, Great Britain, Italy, Austria and Spain are off the table. The US Treasury has not provided any information on India or Turkey.

A minimum tax of 15% for large companies has been agreed upon under 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.

The two-pillar concept is central to this: the first aims to ensure a fairer distribution of tax rights for countries in relation to the profits of large multinational corporations – especially from the digital economy. Part of the rights are transferred from the countries in which the companies are located to those countries that make profits in their markets. The second pillar is the global minimum tax, which should be 15 percent.

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