US drops punitive tariffs: progress on global minimum tax

Status: 10/22/2021 8:30 a.m.

The USA waived punitive tariffs against five European countries in the dispute over national digital taxes. An important condition for the introduction of the global minimum tax has thus been met.

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

“This allows an end to the trade measures decided in response to digital taxes,” said the US Treasury Department. The ministry spoke of a “pragmatic solution” and announced further talks in the course of a “constructive dialogue”. The digital taxes are particularly aimed at US Internet giants such as Facebook, Google and Amazon because, according to critics, the corporations pay too few taxes in individual markets.

The USA had threatened the countries with punitive tariffs as a consequence of the introduction of national digital taxes, but initially postponed their levying in order to find an international solution.

States want to prevent tax competition

In July 2020, the USA initially threatened punitive tariffs of 25 percent on French imports worth 1.3 billion dollars. Washington argued that a French digital tax discriminated against US companies. Last June, US Trade Representative Katherine Tai announced punitive tariffs against Great Britain, Italy, Austria, Spain, India and Turkey. In this case, too, the tariffs did not come into force, but were initially put on hold for six months in order to find time for an international solution.

The punitive tariffs against France, Great Britain, Italy, Austria and Spain are now off the table. The US Treasury Department did not provide any information on India or Turkey.

New rules should come into force in 2023

An agreement on a worldwide minimum taxation for large corporations was reached within the framework of the Organization for Economic Cooperation and Development (OECD). The agreement is expected to come into force in 2023 and prevent a downward tax race between individual countries.

The US trade representative Katherine Tai praised the compromise, but stressed at the same time: “We will continue to oppose the introduction of unilateral taxes on digital services.” According to the news agency “Europa Press”, the Spanish finance minister María Jesús Montero said that the agreement shows Spain’s will to find an international consensus.

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