The United States and India have extended until Sunday a standstill agreement on US retaliation for India's digital services tax, aligning it with a fast-approaching deadline for a global deal to reallocate tax rights to the largest and most profitable companies in the world, the US Treasury. said Friday.
In a brief announcement, the Treasury said a political commitment from November 2021 that expired on March 31 would be extended until the end of the month as negotiations continue on the “Pillar 1” tax deal.
The Pillar 1 deal is in danger of collapsing as the US, India and China have failed to agree on key elements of the deal related to the calculation of transfer pricing to help to determine local tax obligations.
The stakes of last-minute negotiations are high. The failure of the deal could lead several countries to reinstate their taxes on US tech giants such as Apple, Alphabet's Google and Amazon.com and risk punitive duties on billions of dollars in exports to the US .
The extension of the US-India deal also aligns it with the expiration of similar agreements with six other countries that had enacted taxes on digital services: Austria, Britain, France, Italy, Spain and Turkey.
These countries suspended their taxes on digital services shortly after nearly 140 countries reached a two-pillar tax deal in October 2021 to impose a global minimum corporate income tax of 15% and complete negotiations on the reallocation of 'some tax rights of the large multinationals in the countries where they sell goods and services. This was intended to replace taxes on digital services.
At the same time, the US Trade Representative's office agreed to suspend planned trade retaliation against digital taxes while negotiations are completed.
US negotiations are being led by the Treasury, where a spokesman declined to comment on the status of the negotiations.
A USTR spokesman also declined to comment on next steps, but added: “As we've said previously, we oppose digital services taxes that unfairly target American businesses and the Inclusive Framework negotiations of the OECD/G20 offer the best way to address the challenges that the digitization of the economy poses to the international tax system.”
Treasury Secretary Janet Yellen told Reuters at a G7 financial meeting in May that India and China were standing in the way of agreement on the alternative transfer pricing mechanism known as “Amount B,” but that the talks continued.
Italy's finance minister also blamed US demands for the inability to agree on terms. Italy is seeking an extension of the US status quo agreement and sources told Reuters on Friday that Italy has asked Google to pay $1 billion in unpaid taxes.
© Thomson Reuters 2024
(This story has not been edited by NDTV staff and is automatically generated from a syndicated feed.)
