The deadline for the US and India to extend the digital tax agreement to Sunday is nearing

The US and India have extended the deal until Sunday on US retaliation for India's digital services tax. It has shortened the deadline for a global deal to redistribute taxing rights for the world's biggest and most profitable corporations, the US Treasury Department said on Friday.

In a brief announcement, the November 2021 political compromise, which expired on March 31, will be extended until the end of the month while negotiations on the Pillar 1 tax deal continue.

The Pillar 1 agreement is at risk of failure as the US, India and China have failed to agree on key elements of the agreement relating to calculation of transfer prices for determining local tax liability.

There are many pitfalls in last-minute negotiations. If the deal fails, it could lead many countries to reinstate their tariffs on US tech companies such as Apple, Alphabet's Google and Amazon.com and put billions of dollars in tariffs on exports to the US at risk.

The extension of the US-India deal coincides with the expiration of similar agreements with six other countries that have introduced taxes on digital services: Austria, Great Britain, France, Italy, Spain and Turkey.

Shortly after the two-pillar tax agreement was reached by nearly 140 countries in October 2021, these countries suspended their digital services taxes, set a global minimum corporate tax of 15% and began negotiations to transfer some taxing rights for large multinationals to the countries that have them. They sell goods and services. It should replace digital service lines.

At the same time, the U.S. Trade Representative's office agreed to hold off on planned digital tax retaliation until negotiations are completed.

Negotiations are being conducted by the Treasury Department in the US, where a spokeswoman declined to comment on the status of negotiations.

A spokeswoman for the US Commerce Department declined to comment on next steps, but added: “As we have said, we oppose digital services taxes that unfairly target US companies and negotiations under the OECD/G20 inclusive framework offer the best way forward. The challenges the digitization of the economy poses to the international tax system. .”

Treasury Secretary Janet Yellen told Reuters at the G7 finance meeting in May that India and China were suspending an agreement on alternative transfer pricing, known as Amount B, but negotiations would continue.

The Italian finance minister blamed US demands for his inability to accept the terms. Italy is seeking to extend a standstill agreement with the United States, and sources told Reuters on Friday that Italy had asked Google to pay $1 billion in unpaid taxes. (Reporting by Kostas Pitas; Editing by Rami Ayyub and Rod Nickel)