International Tax Policy
As the leading business organization on international tax issues, the NFTC advocates for tax policies that strengthen U.S. companies’ global competitiveness, spur investment across broad sectors of the economy and benefit working Americans.
Through its Tax Committee, the NFTC works with member companies to advance shared priorities across international organizations, foreign jurisdictions, tax treaties and U.S. legislative and federal rulemaking priorities.
NFTC’s tax work is concentrated on the following issues:
- Domestic Legislation: Advocating for domestic tax legislation – including reform of GILTI, domestic policy priorities and potential future legislative efforts to implement an OECD agreement – that strengthens our member companies’ ability to compete internationally.
- Domestic Regulatory Framework: Ensuring that any new tax regulation helps reduce uncertainty for businesses and does not add to unnecessary administrative burden on companies.
- International Regulatory Framework: Promoting international tax policies that promote non-discriminatory access to international markets and ensure that U.S. companies can compete on a level playing field abroad.
- Intersection of Trade and Tax Policies: Engaging across the U.S. government and International Organizations on a growing range of issues that involve tax and trade policymakers on issues like digital taxes, customs valuation and VAT collection, and climate-related tax incentives and border adjustment mechanisms.
Digital Services Taxes (DSTs)
Digital Services Taxes (DSTs) are harmful taxes, mainly imposed on gross revenue, levied on multinational corporations in domestic markets where consumers access digital offerings and services. Whereas until now the tax nexus has been physical presence, DSTs are levied on companies doing digital business in a country where they do not have a physical presence.
DSTs may cover online sales, e-commerce, digital advertising, operating online marketplaces, streaming services, selling user data, and other forms of digital services. They are made up of gross receipt taxes and transaction taxes; beyond this, DSTs are levied differently from country to country. NFTC created this tracker to clarify the differences.
The original purpose for Digital Service Taxes (DSTs) was to combat Base Erosion and Profit Sharing (BEPS) strategies by multinational companies. Countries around the world attempted to implement these taxes to prevent companies from avoiding paying corporate income taxes (especially in developing countries that rely on the taxation of foreign multinationals for income). U.S. Foreign tax credit regulations do not allow a credit for DSTs resulting in double taxation on impacted multinational companies.
On July 12, 2023, under the auspices of the Organization of Economic Cooperation and Development (OECD), countries with DSTs in place “have agreed to extend the current pause on the taxes through 2024 while work continues on implementation of global tax reform.” The OECD first attempted to reach a global consensus on DSTs in 2021.
Canada did not join the OECD agreement and instead re-proposed a DST that, once implemented, will be retroactive to 2022.
