Feb 26, 2021 - Technology

U.S. takes step toward international digital tax deal

Janet Yellen

Photo: Alex Wong/Getty Images

Treasury Secretary Janet Yellen said Friday that regulators have agreed to eliminate a controversial part of the U.S. government plan to reform global digital tax rules, clearing the way toward a quicker deal.

What's happening: Yellen told G20 finance ministers the U.S. would be dropping a "safe harbor" provision the Trump administration had been fighting for, which would have essentially allowed tech companies to opt out of any new tax regime, the FT reports.

Why it matters: It signals that Washington is ready to make progress on an international digital tax deal, something the Trump administration did not achieve.

Context: Countries around the world, including France, have been trying to establish digital taxes, which are usually aimed toward American tech giants that make money off of international users.

  • The effort has picked up steam in the U.S. as well — Maryland just became the first state to enact a tax on digital advertising.
  • The business and tech communities have been watching to see how the Biden administration would take up this issue. The process has been moving slowly and European countries have been anxious to push forward with their tariffs.

What they're saying: Tech companies want one global digital tax deal, arguing that they are happy to pay their fare share, 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," Google vice president of government affairs and public policy Karan Bhatia wrote in a blog post Thursday.

What's next: Countries will continue trying to work out a deal at the Organization for Economic Cooperation and Development, where negotiations have been taking place.

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