Countries concur to extend the tax moratorium on digital services through 2024

The OECD announced on Wednesday that nations having digital services taxes, with the exception of Canada, have decided to postpone enacting them for at least another year due to the delay in the global multinationals tax agreement that was supposed to replace them.

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More than 140 nations were expected to begin implementing the 2021 agreement next year, which will update long-standing regulations on how governments tax multinational corporations. These regulations are widely regarded as being out of date because tech giants like Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) may report income in low-tax nations.

The two-pillar agreement’s first component attempts to transfer taxing authority over around $200 billion in revenues from the largest and most profitable multinational corporations to the nations where their sales are made.

More than 30 governments that already impose or are considering imposing national digital services taxes have decided to put them on hold until the end of this year, or to completely abandon them once the first pillar takes shape.

The second pillar urges states to stop tax rivalry among themselves in order to entice investment by establishing a global minimum corporation tax rate of 15% starting in 2019.

The Organization for Economic Cooperation and Development announced after talks in Paris that while the first pillar’s multilateral treaty is being questioned by some nations, the second pillar is progressing with over 50 countries already working to implement it.

The goal is now for the treaty to enter into force in 2025 rather than 2024 as had been originally envisaged. As a result, the intention is now to finalize the details so nations may sign off before the end of the year.

The moratorium on national digital taxing rights will be extended through 2024 with the potential to extend further through 2025 if necessary if at least 30 nations join, according to the OECD.

Only five of the 143 parties to the agreement—Belarus, Canada, Pakistan, Russia, and Sri Lanka—were unable to show their support during the meeting, according to OECD head of tax Manal Corwin.

Canada, the only one of the five holdouts with a digital services tax, “was not in agreement with the standstill,” Corwin told journalists.

However, even once governments ratify the pact, it won’t be simple to do so, particularly in the US where a two-thirds majority in the Senate is required.