US and Five European Countries Reach Agreement on Digital Tax Dispute

[Image source=AP Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] The United States and five European countries have tentatively reached an agreement on the long-standing dispute over the digital tax.

According to Bloomberg on the 21st (local time), the United States and five European countries (the United Kingdom, France, Italy, Spain, and Austria) announced a joint statement to replace the current digital tax with a new tax system under multilateral discussions and agreed to continue constructive discussions on the matter.

As a result, the tariff conflict over the digital tax between the United States and major European countries is expected to be resolved for the time being.

Under this agreement, European countries will maintain the existing tax system until the introduction of the OECD-level digital tax in 2023, suspend additional tax discussions, and once the global digital tax is implemented, proceed with refund procedures if excess tax revenue arises from the existing tax system.

The United States will withdraw the currently suspended retaliatory tariffs against these five countries.

Previously, European countries led by France, dissatisfied with the pace of OECD-level discussions on the digital tax, had been pushing to impose a digital tax independently on multinational IT giants such as Facebook.

France, which has already established a digital tax, collects approximately 350 million euros (about 479.7 billion KRW) annually from it.

The United States considered this an unfair act against its companies and, during the Donald Trump administration, even announced plans to impose retaliatory tariffs on French consumer goods such as wine and cheese.

The deep tariff war between the two sides reached a turning point after President Joe Biden took office.

Choosing Europe as his first overseas destination in June, President Biden temporarily suspended retaliatory tariffs to end the Trump-era 'Atlantic trade war' and has since been narrowing differences over tariffs through a series of negotiations.

At the same time, he has promoted OECD-level discussions for the introduction of the digital tax, setting the framework for the system's implementation by 2023.

Rishi Sunak, the UK Chancellor of the Exchequer, said in a statement, "With this agreement, the digital tax is protected until 2023."

Gernot Bl?mel, Austria's Finance Minister, evaluated, "This allows us to avoid US retaliatory tariffs and protect our tax system until global tax reform is completed."