WASHINGTON (Reuters) – US Treasury Secretary Janet Yellen told G20 officials that Washington had dropped the Trump administration’s proposal to allow some companies to exclude themselves from new global digital tax rules, they said on Friday. US and European officials, raising hopes for a deal by the summer.
Nearly 140 countries have set a mid-2021 deadline to conclude talks to modernize outdated rules on how much governments can tax cross-border trade and set a global minimum corporate tax rate after negotiations nearly came to a halt last year because of to the US proposal.
“Secretary Yellen announced that we will make a strong commitment to address both pillars of the OECD project, and that the United States is no longer advocating the ‘safe harbor’ implementation of Pillar 1,” said a US Treasury official.
Already challenging multilateral talks to reform global taxes under the Organization for Economic Cooperation and Development stalled after former Treasury Secretary Steven Mnuchin insisted on the contentious measure in late 2019.
Tax experts and financial officials around the world had warned that the American proposal could have allowed large American companies such as Amazon, Alphabet’s Google and Facebook to opt out of what was agreed internationally.
Yellen’s statement to the G20 finance ministers and central bankers was very well received by European officials.
German Finance Minister Olaf Scholz described the US move as a breakthrough that could pave the way for a broader deal.
“My American colleague Janet Yellen told the G20 finance ministers today that the United States would participate and that new regulations for fair international taxation should be binding on all companies,” he said in a statement after the meeting.
He said Yellen told G20 officials that Washington also planned to reform America’s minimum tax regulations in accordance with an OECD proposal for a global effective minimum tax.
French Finance Minister Bruno Le Maire, one of the most outspoken critics of America’s safe harbor proposal, echoed his praise.
“Finding a deal for the summer is within our grasp, especially now that the United States has confirmed that they are abandoning the safe harbor principle,” Le Maire said after the meeting.
In a letter to G20 officials published Thursday, Yellen underscored the Biden administration’s commitment to multilateral discussions on the issue of global taxation, “overcoming disagreements and finding workable solutions in a fair and judicious manner.”
Reporting by Andrea Shalal in Washington, Michael Nienaber in Berlin, Leigh Thomas in Paris and Jan Strupczewski in Brussels; Editing by Jonathan Oatis and Andrea Ricci