((Automatic translation by Reuters, please see disclaimer https://bit.ly/rtrsauto))
(Updates throughout article with details on global tax negotiations, USTR commentary in ninth paragraph) by David Lawder
The United States and India extended until Sunday a standstill agreement on U.S. retaliation over India’s digital services tax, bringing it in line with a fast-approaching deadline for a global agreement to redistribute taxing rights on the world’s largest and most profitable companies, the U.S. Treasury Department . said Friday.
In a brief announcement, the Treasury indicated that the political compromise from November 2021, which expired on March 31, would be extended until the end of the month while negotiations on the “pillar 1” tax deal continue.
The Pillar One deal risks collapsing as the US, India and China fail to agree on key elements of the transfer pricing agreement to help determine local tax liabilities.
The stakes of these last-minute negotiations are significant. The failed deal could prompt several countries to reimpose their taxes on U.S. tech giants such as Apple AAPL.O, Google GOOGL.O and Amazon.com AMZN.O, risking punitive tariffs on billions of dollars in exports to the United States.
The extension of the agreement between the US and India also coincides with the expiration of similar agreements with six other countries that had introduced taxes on digital services: Austria, the UK, France, Italy, Spain and Turkey.
These countries suspended their taxes on digital services shortly after nearly 140 countries reached a two-pillar tax agreement in October 2021 to impose a global minimum tax of 15% of corporate income and to end negotiations on the redistribution of certain taxing rights for large multinational corporations. countries where they sell goods and services. This measure was supposed to replace taxes on digital services.
At the same time, the US Trade Representative’s office agreed to suspend planned trade retaliation against taxes on digital services for the duration of the negotiations.
The US negotiations are being led by the Treasury Department, a spokesman for which declined to comment on the progress of the talks.
A USTR spokesman also declined to comment on next steps, but added: “As we have said in the past, we oppose digital services taxes that unfairly target US businesses, and the framework negotiations including the OECD/G20 offer the best path to solve the challenges that the digitization of the economy poses to the international tax system”
Treasury Secretary Janet Yellen told Reuters at a G7 finance meeting in May that India and China blocked a deal on the alternative transfer pricing mechanism known as “Amount B” (), but that discussions were continuing.
Italy’s finance minister also blamed US demands for a lack of agreement on terms. Italy is seeking an extension of the US standstill agreement, and sources told Reuters earlier on Friday that Italy had asked Google to pay $1 billion in unpaid taxes.
