After G20 endorses tax deal, Italy says its digital levy could stay for two more years

G20 finance leaders endorsed a global tax deal that calls for the elimination of unilateral digital services taxes, but Italy’s economy minister said it may take up to two years to eliminate the digital levy imposed by Rome.

The timing of the removal of digital services taxes aimed largely at U.S. technology platforms such as Alphabet Inc’s Google, Facebook Inc, Amazon.com Inc and Apple Inc could become a new source of tension with Washington after 136 countries agreed to revamp international corporate taxation last week.

Italian Economy Minister Daniele Franco said after chairing the G20 meeting that Rome would remove its digital tax by 2024 in line with the OECD deal to impose a 15% minimum corporate tax and partly redistribute taxing rights on large, highly profitable multinationals.

The agreement envisions implementation by the end of 2023 and immediately bans imposition of new digital taxes, but does not specifically address the timing for removal of existing digital levies. It notes that “transitional arrangements are being discussed expeditiously.”

U.S. officials have sought a faster removal of existing digital taxes after the deal.

Franco said national digital taxes were always “suboptimal solutions” and that he expected other countries would take the same line as Italy in canceling them.

“We expect national unilateral taxes to be removed by 2024,” he told reporters at a news conference.

U.S. Treasury officials said on Monday that they believed talks on the removal of digital taxes would ultimately eliminate the need for the United States to pursue retaliatory tariffs on countries that have imposed the levies – including Italy, France, Britain, Spain, Austria, India and Turkey.

USTR has readied tariffs, but immediately suspended them to allow for negotiations on the global tax deal. The suspensions expire on Nov. 28.

Franco said Italy is currently collecting about 250 million euros ($290 million) annually in digital taxes, which are based on the revenues of digital services sold in the country.

He said Italy would collect at least as much revenue from the new tax arrangement, which allows market countries taxing rights on a share of 25% of the profits above a 10% margin based on the local sales of companies with more than $20 billion in revenues.

The arrangement was designed to capture tax revenue from major U.S. technology firms, as well as those from other industries.

The Information Technology Industry Council, a trade group representing U.S. tech firms, said it welcomed the G20’s endorsement of the global tax deal, which contains a commitment not to impose new digital services taxes.

“Given that many unilateral digital services tax measures are still in place, we continue to call for their urgent withdrawal to provide much-needed certainty and predictability for businesses,” the group’s chief executive, Jason Oxman, said in a statement.

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