US Concedes On Voluntary Provision In Global Digital Tax Discussion

According to U.S. Treasury Secretary Janet Yellen, Washington is poised to drop a contentious part of its proposal for reforming global tax rules, which had been the main stumbling block for an agreement concerning tech companies, Financial Times (FT) reports.

With the move, long-stalled multilateral negotiations at the OECD, which had struggled to make progress after the President Donald Trump administration insisted on a “safe harbor” rule in 2019, might begin anew. The provision would’ve allowed technology companies to go with any agreement on a voluntary basis.

Several European countries weren’t fans of the idea. Because of the dire prospects for a better deal during the Trump years, several countries, mostly in Europe, moved to introduce their own levies on tech companies in order to prevent them from paying little or no taxes on their sales.

Yellen, speaking on Friday (Feb. 26) at a meeting of G20 finance ministers, said the U.S. wouldn’t advocate for a safe harbor implementation. Bloomberg writes that she said the U.S. would “engage robustly” to address both parts of the OECD project, including both the tax challenges of digitization and the robust global minimum tax.

One official close to the deal said they wanted a deal on both pillars of the proposal by July, and that the next few weeks would be “critical” to whether or not that happens. But the person, who was unnamed by FT, said the dynamic looked positive thus far.

The issue of what to do with big tech companies has been at the forefront of many countries’ minds, with France looking into its own powers to level penalties. The European Union was also looking into plans to let member states levy penalties for bad behavior.

France, as a result, had its minister of the digital economy, Cedric O, in contact with EU officials on tech regulation. French officials are looking to make changes to the Digital Services Act (DSA), which looks into how companies should police the web. The country is aiming to let EU member states levy fines against tech platforms and remove content they deem illegal.