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US retaliatory tariffs on digital taxes suspended

US retaliatory tariffs on digital taxes suspended

Austria and four other European countries have agreed with the US to extend US retaliatory measures over the taxation of digital services in European countries. An October 2021 deal to end threatened U.S. retaliatory tariffs will be extended until June 30, a statement from the office of U.S. Trade Representative Catherine Doy with Austria, the U.K., France, Italy and Spain said.

The extension aims to give larger, more profitable companies more time to negotiate international taxation rights.

The contract was previously limited to the end of 2023. According to the Finance Ministry in Vienna, multilateral negotiations on the extension had already started in October – although it was already clear in December that all involved would agree to a basic extension. A final agreement on specific wording was reached in early February 2024.

The US Trade Representative had earlier threatened to impose a 25 percent tariff on imports from five European countries and Turkey as these countries introduced a digital tax. According to U.S. Trade Representative Tai, the tariffs on digital services are discriminatory because they primarily target U.S. tech giants Facebook owner Meta, Google parent Alphabet, and Apple. The US has already introduced retaliatory measures against France over its national digital tax, but has initially held them off.

Thursday's joint statement expands on the status quo and is consistent with a statement by the G20 and OECD countries in December that a deal should be finalized by the end of March and signed by June 30.

By October 2021, under the umbrella of the OECD, the Organization of Industrialized Nations, nearly 140 countries had agreed on the details of global tax reform. This includes a minimum tax of 15 percent for companies operating internationally. In addition, developing countries need to receive more revenue from the world's largest corporations. Tax havens need to dry up and big digital companies in particular need to be more accountable.

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A digital tax is introduced in Austria from 2020. Last year it generated 103 million euros. Taxation of online advertising services in Austria is 5 percent on an assessment basis and is aimed at companies with a global turnover of at least 750 million euros and a domestic turnover of at least 25 million euros from online advertising services. The assessment base for digital tax is the payment received by an online advertisement provider from a customer.