The negotiations on a new tax regime are slowed down by political disagreements between countries.
No agreement until mid-2021: On 12 October 2020, the OECD issued a statement saying that it will now work to reach an agreement on a tax framework for digital services by June 2021. The OECD was initially planning to finalise a deal by the end of 2020.
Consensus is still lacking on key issues: The OECD has been working on a new tax regime since 2017, however political disagreements have got in the way of reaching wide consensus between members. The main obstacles are on the scope of digital taxation (i.e. which companies should be subject to it), and on whether the new framework should be mandatory or voluntary.
The US threatened retaliation against European countries: During 2018, the European Commission tried to adopt a proposal on a digital tax, but EU countries failed to reach an agreement due to diverging interests. Since then, individual countries (France, Italy, UK), have launched their own digital taxes, but have agreed to postpone levying them while an international agreement was reached. The US Trade Representative launched investigations against these taxes, and could introduce retaliatory tariffs against the countries whose digital tax it finds discriminatory towards US companies.
