David Lawder
(Reuters) – The US and India have prolonged a standstill settlement on US retaliation over India’s digital-services tax till Sunday, aligning it with a fast-approaching deadline for a world deal to reallocate taxing rights on the world’s largest and most worthwhile firms, the US Treasury mentioned on Friday.
In a quick announcement, the Treasury mentioned {that a} November 2021 political compromise that expired March 31 can be prolonged via the top of the month, as negotiations on the “Pillar 1” tax settlement proceed.
The Pillar 1 deal is in peril of collapse, because the US, India and China have did not agree on key parts of the deal associated to calculation of switch pricing to assist decide native tax liabilities.
The stakes of the last-minute negotiations are excessive. The deal’s failure may immediate a number of international locations to reinstate their taxes on US tech giants comparable to Apple, Alphabet’s Google, and Amazon.com and threat punitive duties on billions of {dollars} in exports to the US
The extension of the US-India settlement additionally aligns it with the expiration of comparable offers with six different international locations that had enacted digital-services taxes: Austria, Britain, France, Italy, Spain and Turkey.
These international locations suspended their digital-services taxes shortly after a two-pillar tax deal was struck in October 2021 by practically 140 international locations to impose a 15% world minimal company earnings tax and full negotiation on reallocating some taxing rights on massive multinationals to international locations the place they promote items and companies. This was meant to interchange the digital-services taxes.
On the identical time, the US Commerce Consultant’s workplace agreed to droop deliberate commerce retaliation towards the digital taxes whereas negotiations have been accomplished.
US negotiations are being led by the Treasury, the place a spokesperson declined to touch upon the state of negotiations.
A USTR spokesperson additionally declined to touch upon subsequent steps, however added: “As we have mentioned beforehand, we oppose digital-services taxes that unfairly goal US firms and the OECD/G20 Inclusive Framework negotiations provide the most effective path to handle the challenges that digitalization of the economic system poses to the worldwide tax system.”
Treasury Secretary Janet Yellen advised Reuters at a G7 finance assembly in Could that India and China have been hindering settlement on the choice transfer-pricing mechanism referred to as “Quantity B,” however that talks have been persevering with.
Italy’s finance minister additionally blamed the US calls for for the lack to agree on phrases. Italy is looking for an extension of the US standstill settlement and sources advised Reuters earlier on Friday that Italy has requested Google to pay $1 billion in unpaid taxes.
(Reporting by Costas Pitas; enhancing by Rami Ayyub and Rod Nickel)
