U.S. agrees to drop tariffs on countries that imposed digital services taxes as a global tax overhaul moves ahead.

The agreement comes as more than 130 countries agreed this month to an overhaul of the international tax system that will see nations adopt a global minimum tax of 15 percent.,

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U.S. agrees to drop tariffs on countries that imposed digital services taxes as a global tax overhaul moves ahead.

Google's European headquarters in an area in central Dublin known as Silicon Docks, where many major tech companies have their headquarters.
Google’s European headquarters in an area in central Dublin known as Silicon Docks, where many major tech companies have their headquarters. Credit…Paulo Nunes dos Santos for The New York Times
  • Oct. 21, 2021, 12:58 p.m. ET

WASHINGTON — The United States reached an agreement on Thursday with Austria, France, Italy, Spain and Britain that will terminate the threat of American tariffs on certain goods from those countries in exchange for the eventual removal of digital services taxes that they had imposed on companies like Facebook, Amazon and Google.

The agreement comes as more than 130 countries agreed this month to an overhaul of the international tax system that will see nations adopt a global minimum tax of 15 percent and change taxing rights so that large multinational corporations are taxed based on where their goods and services are sold, rather than where they operate.

The part of the agreement that applies to the large firms came in response to a global tax dispute between the United States and European countries, which in recent years imposed the digital services taxes targeted at American technology giants.

Through the deal reached on Thursday, Austria, France, Italy, Spain and Britain will remove their digital services taxes once that part of the global agreement, known as Pillar 1, is enacted. That is expected to occur sometime in 2023. Taxes that are collected from companies between now and then will be eligible for a credit.

The agreement amounts to a concession from the United States, which wanted the digital services taxes to be removed immediately once the global pact was reached earlier this month. European countries refused to do so, citing concerns about whether the United States could actually get the new tax changes through Congress in order to properly comply with the agreement.

The Trump administration initially imposed tariffs on France in 2020 in retaliation for its digital services tax and began the process of imposing tariffs on other countries as well. The Biden administration said earlier this year that it was prepared to impose tariffs on those governments but suspended any action while the global tax talks were underway.

The United States Trade Representative said that Turkey and India, which also have digital services taxes that the United States wants rolled back, did not join the agreement that was reached on Thursday.

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