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U.S. Agrees on Digital Services Tax Phase-Out Deal

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(Image credit: IronHeart via Getty Images)

Under a new agreement, international digital services taxes will be around a little longer, but will count toward a new corporate minimum tax until those digital services taxes can be phased out.

The U.S., Austria, France, Italy, Spain, and the UK have struck an agreement on transitioning away from digital services taxes, which Austria, France, Italy, Spain, and the UK adopted before Organization for Economic Cooperation and Development tax reform talks resulted in a historic agreement on a minimum corporate tax of 15%.

The EU had been planning a digital tax, but held off given the ongoing OECD talks that resulted in that agreement.

The U.S., Austria, France, Italy, Spain, and the UK all signed on to the OECD agreement but disagreed on how to transition from the digital taxes all but the U.S. had enacted before that agreement was struck.

Those countries agreed to withdraw those taxes and not impose any new ones. The new agreement gives countries that imposed digital taxes more time to withdraw those digital services taxes, but however much digital tax is collected from companies in the interim will count toward the 15% minimum corporate tax.

The agreement drew praise by computer companies.

"We welcome the leadership of the United States, Austria, France, Italy, Spain, and the United Kingdom in reaching a compromise that will lead to the removal of existing digital services taxes," said Computer & Communications Association president Matt Schruers.

“While today’s transitional agreement is a meaningful step, it is imperative that all governments urgently and fully withdraw their digital services tax measures,” said ITI’s president and CEO Jason Oxman. “The elimination of such measures is essential to provide much-needed certainty and predictability for businesses, and to prevent further negative ramifications for all industries that do business across borders. As we review the terms of today’s interim agreement, we strongly urge the United States to retain its focus on securing the removal of all unilateral tax measures.”