EU delaying work on digital tax proposal amid global talks

The European Union (EU) is delaying its work on a proposal for a digital tax, as it and other major economies around the world seek to reach a final agreement on a global tax overhaul by October.

A spokesperson for the European Commission, the EU’s executive arm, said in a statement Monday that the EU is focused on a successful conclusion of the multilateral tax discussions.

“For this reason, we have decided to put on hold our work on a proposal for a digital levy as a new EU own resource during this period,” the spokesperson said.

The EU announcement comes after finance officials in the Group of 20 (G-20) on Saturday endorsed key aspects of an international tax framework aimed at addressing tax challenges of the digital economy. G-20 members, including the EU and the United States, are aiming to finalize a detailed implementation plan by October.

One portion of the framework, known as “Pillar 1,” would reallocate some taxing rights over some of the largest multinational companies, including technology companies, from the business’s home country to the countries where they generate profits. The other portion of the framework, known as “Pillar 2,” relates to a global minimum tax of at least 15 percent.

U.S. policymakers have raised concerns about the EU’s work on a digital tax while the multilateral tax discussions are advancing. The U.S. has opposed jurisdictions acting unilaterally to impose digital taxes, arguing that they unfairly target American companies.

When asked about the EU’s work on a digital tax proposal during a press conference on Sunday, Treasury Secretary Janet Yellen noted that the international tax framework that the G-20 has endorsed calls for countries to agree to repeal their own digital taxes and to not establish similar measures in the future.

“It’s really up to the European Commission and the members of the European Union to decide how to proceed, but those countries have agreed to avoid putting in place in the future and to dismantle taxes that are discriminatory against U.S. firms,” Yellen said.

A Treasury Department spokesperson said that the department did not have any comment on the EU’s announcement of a delay of its work on a digital tax.