U.S. drops key obstacle to global digital tax: Treasury

The Trump administration had insisted on a so-called safe harbour clause in the OECD tax that effectively would have allowed big tech companies to comply voluntarily, blocking progress on a deal.

U.S. Treasury Secretary Janet Yellen told her G20 colleagues on February 26 that Washington is dropping a push for a controversial provision in a global digital tax, opening the door to a likely agreement.

The U.S. shift — part of a broader repositioning by President Joe Biden from the “America First” agenda of former President Donald Trump — prompted immediate praise from Germany and France, which said a deal was now “within reach” following the U.S. pivot.

Ms. Yellen announced at the G20 finance ministers meeting that U.S. officials “will engage robustly” in the talks and “is no longer advocating for ‘safe harbour’ implementation of Pillar 1,” a Treasury official told AFP.

The Trump administration had insisted on a so-called safe harbour clause in the OECD tax that effectively would have allowed big tech companies to comply voluntarily, blocking progress on a deal.

The Organization for Economic Cooperation and Development has been working on a multilateral agreement that would include a global minimum corporate tax rate on tech giants.

The aim is to find a common solution to address the policy dilemma of how to tax profits earned in one country by a company headquartered in another that offers more favourable tax treatment.

European officials said the U.S. shift was an important breakthrough.

“This is a giant step forward on our path towards an agreement among the participating states by the summer,” German Finance Minister Olaf Scholz said in a statement following virtual talks with his G20 counterparts.

French Economy Minister Bruno Le Maire said a deal should be reached by summer, calling for negotiations to be “concluded without delay.”
Chair Yellen delivers the semiannual Monetary Policy Report to Congress: _D4A3275 by Federalreserve is licensed under flickr

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