Treasury Secretary Janet Yellen said on Friday that regulators have agreed to scrap a controversial part of the US government’s plan to reform global digital tax rules, paving the way for a faster deal.
What is going on: Yellen told G20 finance ministers that the US would scrap a “safe harbor” provision that the Trump administration had fought for, which would essentially have allowed technology companies to forgo any new tax regime, the FT reports.
Why it matters: It indicates 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 introduce digital taxes, which mostly target US technology giants making money from international users.
- The effort has also risen in the US – Maryland has just become the first state to introduce a tax on digital advertising.
- The business and tech communities have looked to see how the Biden administration would tackle this issue. The process is slow and European countries are eager to make progress on their rates.
What they say: Tech companies want one global digital tax agreement, arguing that they are happy to pay their rate, but it should be uniform.
- “As the global economy seeks to recover from the global pandemic and governments face new fiscal pressures, now more than ever an agreed solution is needed to ensure a sustainable framework for cross-border trade and investment,” said Google, vice-president. president of government affairs and public policy, Karan Bhatia wrote in a blog post on Thursday.
What’s next: Countries will continue to try to work out an agreement with the Organization for Economic Co-operation and Development, where negotiations are ongoing.