Italy and the United States have officially agreed to stand together against what they call “discriminatory” digital services taxes. This development adds momentum to a global debate over how to tax large tech companies like Google, Apple, Facebook, and Amazon—commonly referred to as GAFA.
The joint move was confirmed during a meeting between top officials from both countries, signaling stronger cooperation on international tax reform. The aim is to support a fair and unified system for taxing multinational tech companies, instead of letting individual countries create their own rules that could unfairly target American firms.
What Are Digital Services Taxes (DSTs)?
Digital Services Taxes are charges imposed by governments on revenues earned by tech companies through digital activities in their country. These include income from online advertising, data sales, and digital marketplaces.
Countries like France, Spain, and even Italy itself had earlier introduced such taxes to ensure tech giants paid their “fair share” despite operating digitally without a physical presence. Critics, however, especially the US government, argue that DSTs mostly affect American companies and are therefore unfair.
Why Did Italy Change Its Position?
Italy had previously introduced its own digital tax in 2020, charging 3% on digital revenues of companies earning more than €750 million globally and €5.5 million in Italy. However, this move—like similar steps by other EU countries—caused tension with the United States.
Now, Italy appears to be moving in a new direction. During the recent meetings in Washington D.C., both governments issued a joint statement opposing unilateral tech tax policies. Italy agreed to withdraw its own DST in support of a multilateral solution led by the Organisation for Economic Co-operation and Development (OECD).
This signals a broader desire to resolve trade tensions and avoid tit-for-tat tariffs. The move is also seen as a gesture to strengthen US-Italy economic ties in a post-COVID and post-Brexit global economy.
OECD’s Global Tax Agreement in Focus
The OECD, a group of 38 developed economies, has been working on a global tax framework for digital companies. The idea is to create a fair system where profits are taxed in the countries where users are located—not just where companies have headquarters.
Over 140 countries have already supported this framework, which includes two main pillars:
- Pillar One: Allows countries to tax large multinational companies where they make their sales, even if they don’t have a physical presence.
- Pillar Two: Sets a global minimum corporate tax rate of 15%.
By supporting the OECD-led process, Italy and the US hope to avoid trade conflicts and create a level playing field for businesses worldwide.
US Praises Italy’s Commitment to Fair Taxation
US officials, including Treasury Secretary Janet Yellen, praised Italy’s decision to drop its digital tax and work together on a global deal. They emphasized the importance of a unified tax system to avoid market disruptions and retaliatory tariffs.
“This cooperation with Italy is a positive step toward fair, stable, and modern tax rules that support innovation without punishing any one country’s businesses,” said Yellen.
The US had previously launched investigations into countries with DSTs under Section 301 of its Trade Act, accusing them of unfairly targeting American firms. Although tariffs were proposed, they were paused as negotiations continued.
Business Reactions: Tech Industry Welcomes the Move
Major American tech companies welcomed the announcement. Industry experts said the joint decision between Italy and the US shows that diplomacy can work in solving complex international tax issues.
“Digital services taxes were creating uncertainty and hurting investment,” said a spokesperson from the Information Technology Industry Council (ITI). “A global solution brings clarity and fairness for everyone.”
What This Means for Global Tech Regulation
The agreement between Italy and the US adds pressure on other countries to rethink their own DSTs. France, Austria, and India are still enforcing such taxes, although they are part of the ongoing OECD negotiations.
If more countries agree to drop their unilateral tax policies in favor of a global system, it could lead to smoother trade relationships and greater tax compliance across borders.
It also shows that the US remains committed to protecting its tech industry while also cooperating internationally to solve economic disputes.
Looking Ahead: What’s Next?
Experts believe this agreement is a sign that countries are serious about achieving a global tax deal by the end of the year. The success of the OECD plan now depends on how many more nations agree to withdraw their DSTs and adopt a common framework.
If the plan moves forward, it could reshape how big tech companies are taxed and where. It would also remove the threat of trade wars caused by conflicting national tax policies.
For now, Italy’s decision to stand with the US marks a turning point in international tax policy and strengthens the path toward global economic cooperation.
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Key Takeaways
- Italy and the US have agreed to oppose “discriminatory” tech taxes.
- Italy will withdraw its digital services tax to support OECD negotiations.
- The move is part of a global push for fair and uniform tech taxation.
- US tech firms and trade experts welcomed the cooperation.
- This may influence other countries still enforcing DSTs.
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