OECD framework at risk
The negotiations within the international Organisation for Economic Co-operation and Development (OECD) for a global solution for the taxation of the digital economy have undergone several developments which undermine its stability and progress in the past weeks. The announcement of the second US Trump administration to withdraw from Pillar 1 negotiations has introduced strong uncertainty for businesses in the international taxation system and has opened the way for unilateral measures at the national levels.
The OECD Two-Pillar agreement was intended to replace the unilateral DSTs with a multilateral agreement. Specifically, the unfinished Pillar 1 aims to allocate taxing rights to be exercised more equitably, while Pillar 2 sets up a global minimum corporate tax. A key component of such a regime was a temporary moratorium on introducing further DSTs, which lapsed at the end of 2023 and then extended until end of 2024. In the absence of a prolongation of this DST standstill, and in light of the US announcement to withdraw their commitment to the OECD solution, many countries are now confronted with the new reality that an OECD agreement may no longer be a viable option. As a consequence, certain EU Member States revisiting or expanding their DST regimes to safeguard domestic tax revenues. This risks a return to a fragmented tax landscape, with increased compliance burdens for companies and rising potential for bilateral trade conflicts
EU – US relations
During his first term, US President Donald Trump launched investigated into DSTs imposed by third countries, concluding that they a discrimination against US tech companies. The investigations led to the imposition of retaliatory tariffs in response, which the following Biden administration suspended pending the Pillar 1 negotiations.
One month after dropping the US support to OECD negotiations, on 21 February 2025, US President Trump signed a Presidential Memorandum calling for domestic investigations into potential tariff retaliations against countries which have implemented DSTs. The memo targets 6 countries’ DSTs: France, the UK, Italy, Canada, Spain and Turkey, aiming to identify policies that discriminate against US companies, burden US digital commerce and undermine their global competitiveness. The scope of the memo seems to go beyond just DSTs to evaluate any charge on US-produced content. This US initiative, following the US announcement of retaliatory tariffs against EU VAT on US exports to the EU and against EU rules on content moderation and competition, and coupled with the declaration of the introduction of new sweeping and reciprocal tariffs on third-country imports into the US, evidence that the US administration is looking to redefine the set of international relations and worldwide trade, shaping a new era in digital commerce on the global scale.
Digital Services Taxes in the EU
A handful of EU Member States have initiated national debate on the introduction of new digital services taxes as of 2025, notably Belgium, France, Italy, Poland and Spain. These DSTs apply to revenues from the provision of “digital services” such as online intermediation, online advertising, sale of users’ data, etc., which are not subject to regular local corporate income tax. The national legislative initiatives have however triggered a reaction from the US, which aims to relocate taxing rights to the country of establishment of the US companies, so preventing that European Union’s countries tax US companies on the revenues generated in the EU. To respond to the US with a united and firm views, some EU Member States are inclined to see an EU initiative on DST, rather than a fragmented landscape of EU national initiatives.
Ecommerce Europe’s perspective
Ecommerce Europe believes that only a multilateral, global solution at OECD level will be able to fully solve the taxation challenges created by the fast-digitalizing economy, and successfully reduce the risk of double taxation and international trade distortions, or even retaliation measures from non-EU countries.
A framework agreement at the international level would ensure consistency and stability in the international scenario, and would avoid unilateral measures and the fragmentation of the international tax system. In particular, the EU Single Market would be put at a disadvantage if EU Member States were to introduce unilateral measures which differ from country to country.
However, should the OECD prove to be no longer able to guarantee a consensus-based agreement on international taxation, the EU should pursue a consistent approach of all EU Member States and consider the feasibility of a harmonious measure that prevents unilateral national initiatives, which could trigger double taxation, international tax instability, retaliatory measures from trading partners, and overall international trade disruptions.