US and Five European Countries Agree to Abolish Digital Tax upon Introduction of Global Minimum Corporate Tax

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Suhwan] The United States, the United Kingdom, France, Italy, Spain, Austria, and five other European countries have agreed to abolish their independently implemented digital taxes if the global minimum corporate tax is successfully introduced.

The Wall Street Journal (WSJ) reported on the 14th (local time) that Bruno Le Maire, France's Minister of Finance, stated, "This is good news. We (the five European countries) were able to reach an agreement with the United States on measures to withdraw the digital tax."

A spokesperson for the U.S. Treasury Department also confirmed that such an agreement had been reached and said that detailed information would be released within a few days.

Until now, some European countries, including France and the United Kingdom, have opposed the fact that U.S. multinational corporations have avoided taxes by shifting profits generated within Europe to countries with lower tax rates.

In response, these countries pursued policies to impose taxes based on the regions where profits are generated, regardless of the location of the multinational corporations' headquarters, by introducing their own digital taxes.

The United States opposed this, calling it unfair and discriminatory trade retaliation against its companies, and during the administration of former President Donald Trump, retaliatory tariffs were imposed on European countries.

Meanwhile, at a meeting hosted by the Organisation for Economic Co-operation and Development (OECD) last week, 136 countries, including the United States and European nations, agreed to introduce a global minimum corporate tax rate of 15%. This eliminated the justification for European countries to impose digital taxes, leading to the agreement to abolish digital taxes on this day.

However, there still appear to be differences between the two sides regarding the timing of the digital tax abolition.

The agreement on this day did not specify the exact timing for the abolition of the system. The U.S. side demanded a prompt abolition of the digital tax, but European countries reportedly did not set a fixed timeline, according to WSJ.

Daniele Franco, Italy's Minister of Finance, stated, "The national digital taxes will be abolished in line with the expected introduction of the global tax by the end of 2023 or early 2024," adding, "In previous discussions related to the introduction of the global minimum corporate tax, it was agreed that this system would automatically abolish the digital tax."

The U.S. Republican Party and the business community are demanding a swift abolition of the digital tax.

Kevin Brady, a Republican member of the U.S. House Ways and Means Committee, said, "Countries that have introduced digital taxes should suspend their own tax measures during the ongoing OECD negotiation process for the introduction of the global minimum corporate tax, in accordance with the principle of good faith."

This content was produced with the assistance of AI translation services.