European Union finance ministers are set to ditch a plan to introduce an EU-wide digital tax next week.
However, they have agreed to work on a global reform of the taxation of internet companies, according to an EU document.
The turnaround is a major boost to Ireland, which has opposed the plan for a digital tax.
Revenue has estimated that such a tax could cost the Exchequer as much as €160m a year.
Under the proposal, which was led by France, a 3pc levy would be placed on digital revenues of large tech firms.
They would be able to write it off against corporation tax - which could hurt Ireland as many of the companies are based here.
The decision by finance ministers to abandon the levy is likely to be welcomed by digital giants like Google and Facebook, which have their European headquarters in Ireland.
"A number of delegations continue to have fundamental objections," the Romanian presidency of the EU wrote in a document prepared ahead of the EU finance ministers meeting due to take place on March 12.
The meeting had been seen as the last opportunity to reach a deal on the plan.
The document showed that EU ministers are expected to agree instead to keep working on a global tax reform prepared by the Organisation for Economic Co-operation and Development.
Finance Minister Paschal Donohoe has consistently said he believes this is the right forum for reforming multinational tax.
Global reform of tax rules has been debated for years but has never been agreed as national interests differ widely.
Under the plan originally rolled out by the EU Commission last year, large companies would have been required to pay a levy on data sales, online marketplaces and targeted advertising.
But several EU states blocked it, fearing a loss of revenues and retaliation from the United States and other countries affected.
Tax reforms on the EU level must be backed by all 28 member states to be approved, but Ireland and Scandinavian countries have staunchly opposed the overhaul.
Other countries have also been sceptical about the proposal.
In a bid to salvage the plan, France - the keenest supporter of the digital tax - agreed in December with Germany, the largest economy in the bloc, to limit its scope only to digital advertising. However even this watered-down plan met with scepticism in some capitals.
As the plan floundered, France, Italy and Spain have moved to introduce digital taxes on the national level.
EU judges dealt a possible blow to an EU crackdown against tax avoidance by global multinationals on Thursday by annulling an order by the EU executive against a Belgian tax-break scheme for about 35 large companies.