Negotiations regarding the future of OECD Pillar One Amount A are taking place at this week’s G20 finance leaders meeting in Rio de Janeiro, discussions have now extended beyond the 30 June, 2024, deadline.
This latest round of talks are aimed to advance a stalled plan to reallocate taxing rights for large multinational corporations.
The “Pillar 1” framework, established as part of a 2021 global two-part tax agreement, aims to eliminate unilateral digital services taxes (DSTs) imposed on US tech giants such as Apple, Google, and Amazon. Failure to reach an agreement on final terms could prompt several countries to reinstate their taxes on these large US tech companies and risk punitive duties on billions of dollars in exports to the US.
Standstill agreements under which Washington has suspended threatened trade retaliation against seven countries — Austria, Britain, France, India, Italy, Spain, and Turkey — expired on 30 June, 2024, but the US has not taken steps to impose tariffs.
An Italian government source said that European countries were seeking assurances that the US tariffs on some USD 2 billion worth of annual imports from French Champagne to Italian handbags and optical lenses remained frozen. At the same time, the talks continue, including at the G20 meeting in Rio de Janeiro.
A European Union document prepared for the G20 meeting lists finalising the international tax deal as a “top priority.”
It said the G20 should urge countries and jurisdictions participating in the tax deal “to finalise discussions on all aspects of Pillar 1, with a view to signing the Multilateral Convention (MLC) by the end of summer and ratifying it as soon as possible.”
Canada became the eighth country to impose a unilateral digital services tax, with Finance Minister Chrystia Freeland saying it was “simply not reasonable, not fair for Canada to indefinitely put our own measures on hold” after the June 30 deadline passed without a Pillar One agreement.
The US maintains that such taxes are discriminatory because they specifically target the local revenues of US tech firms that dominate the sector.
“Treasury continues to oppose all tax measures that discriminate against US businesses,” a US Department of Treasury spokesperson said in response to Canada’s move. “We encourage all countries to finalise the work on the Pillar One agreement. We are in active discussions on the next steps related to the existing DST joint statements.”
A spokesperson for the US Trade Representative’s office added that the OECD/G20 negotiations “offer the best path to address challenges that digitalisation of the economy poses to the international tax system.”
Earlier, during a G7 finance meeting in May, US Treasury Secretary Janet Yellen informed Reuters that India and China were obstructing the consensus on an alternative transfer pricing mechanism referred to as “Amount B.”
The “Amount B” plan will be applicable for companies with annual revenues under USD 20 billion threshold, which was originally set for “Amount A”. The “Amount B” was proposed to offer these companies as an alternative way to determine their tax liabilities.
