Treasury Secretary Janet Yellen said on Friday that regulators had agreed to eliminate a controversial part of the U.S. government’s plan to reform global digital tax rules, paving the way for a faster deal.
What is happening: Yellen told the G20 finance ministers that the United States would abandon a “safe harbor” clause that the Trump administration had been fighting for, which would essentially allow technology companies to opt for any new tax regime, reports the FT.
Why it matters: This signals that Washington is ready to move forward with an international digital tax deal, something the Trump administration has failed to achieve.
Context: Countries around the world, including France, have tried to establish digital taxes, which are generally targeted at American technology giants who make money from international users.
- The effort also gained momentum in the United States – Maryland has just become the first state to institute a tax on digital advertising.
- Business and technology communities have been watching how the Biden government would address this issue. The process is moving slowly and European countries are eager to move forward with their tariffs.
What they are saying: Technology companies want a global digital tax deal, arguing that they will be happy to pay their share of the tariff, but that it should be uniform.
- “As the world economy seeks to recover from the global pandemic and governments face new fiscal pressures, an agreed solution is needed now more than ever to ensure a durable framework for cross-border trade and investment,” vice president for government affairs and Google’s public policy Karan Bhatia wrote on a blog on Thursday.
What is the next: Countries will continue to try to reach an agreement at the Organization for Economic Cooperation and Development, where negotiations are taking place.