Bulletins

US forges pact to mitigate EU tax on Big Tech

The agreement represents a win for Big Tech firms. It also belies the conjoined interest of the U.S. government and Big Tech firms.

Map of Europe
Image: Zarthon

The U.S. government announced on Thursday that it reached an agreement with Austria, France, Italy, Spain and the United Kingdom on the digital services tax for Big Tech.


The European nations agreed that they would end their unilateral digital services tax once a G20-backed global tax on Big Tech has been put in place. This is expected to happen around 2023 as part of a broader push to enforce a minimum 15% global corporate tax rate.

The U.S. in turn agreed to terminate proposed retaliatory tariffs against those countries. This became an issue during the Trump presidency, for instance, when the U.S. threatened to place tariffs on French cheeses and champagne if France went through with a plan to levy a tax against Big Tech firms.

Austria, France, Italy, Spain and the United Kingdom will not be required to change their current tax policies aimed at Big Tech as part of the agreement. They will, however, give those tech companies a tax credit if they impose higher taxes in the interim period relative to what comes due after the first full year of taxes under the new global system.

India and Turkey were notably absent from the agreement. Both nations have imposed unilateral digital services taxes that the U.S. government has attempted to push back against.

The agreement represents a win for Big Tech firms. It also belies the conjoined interest of the U.S. government and Big Tech. Whereas politicians on both sides of the political aisle publicly gesture toward a "Big Tech crackdown," in reality the U.S. federal government has unabashedly advocated for Big Tech firms on the international stage.

Big Tech firms have poured money into D.C. lobbying in recent months. Facebook spent $5.1 million on lobbying for the three months ended Sept. 30, which fell short of the social media giant's quarterly spend record. Amazon spent $4.7 million during that same period, Google and Microsoft each spent $2.6 million, and Apple spent $1.5 million.

Would most Americans be willing to accept higher prices on French cheese if it meant these tech behemoths could pay less in overseas tax? Recent polling on the favorability of Big Tech in the eyes of the U.S. public suggests the answer is no.

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Bulletins