Digital Tax Consensus fails: European Union under pressure from the United States, Developing countries will be disappointed

The tax delay is the latest move by the US and EU to improve economic relation. The statement came after talks between US Treasury Secretary Janet Yellen in Brussels Monday (14 July 2021) for meetings with EU finance ministers and Commission officials. In its agreement, the European Union suspended the proposed digital levy. According to a spokesman for the European Union, the G20 leadership supports an overhaul of the rules for taxing international companies, as mentioned by the wall street journal.

The EU has faced intense US pressure to delay any announcements until an agreement among the G20 can be reached. The EU's executive body, the European Commission, has "decided to postpone our work on proposals for a digital levy" until October, the spokesman said. Proposals are expected later this month.

The EU announcement came after US Treasury Secretary Janet Yellen arrived in Brussels for meetings with EU finance ministers and Commission officials, where she is expected to discuss the tax deal and lobby against proposed EU levies, which have been criticized as contradicting the G-20 agreement.

European officials have indicated that they will aim to ensure the EU's digital levy will not undermine the agreement on a global minimum corporate tax, suggesting that they will propose a lower tax rate and structure it in a way to avoid discrimination against US companies.

This agreement is not good news for developing countries trying to explore the potential of digital taxation to meet their budgets. One example is Indonesia, which expects to collect digital taxes through the income tax scheme since 2020. Indonesia is waiting for global consensus, especially the USA and the EU. Developing countries have to extra effort to fill their spending coffers which have continued to swell since the pandemic.