Global agreement on digital services tax is not in sight yet

Following threats of punitive US tariffs, France has announced today at the World Economic Forum meeting in Davos, that it is postponing the implementation of its Digital Services Tax from April to December 2020.

This makes UK insistence that it will proceed with digital services tax in April all the more surprising given both of the following:

• the US has made it clear that it will take the same approach with the UK by applying retaliatory tariffs to UK products or services;

• the UK government has stated that reaching a trade agreement with the USA is one of its most important priorities.

Attempts to reach a global solution on where multi-national tech organisations pay tax now turn to the Organisation for Economic Co-operation and Development (OECD). The quid pro quo for France’s concession today appears to be that the USA has agreed to remove the wording “optional taxation” from the agreed text for OECD negotiations.

However, the USA agreeing on a text to form the basis of negotiations is a long way from having an agreed outcome. Frankly, it is highly optimistic to expect that the 137 countries involved will reach consensus on digital services tax rules by the end of the year.