U.S. Treasury Secretary Janet Yellen has told G20 officials that the Biden administration will drop Donald Trump's objections to new global digital tax rules, paving the way for an agreement by summer.
Trump's demand for a 'safe harbor clause' would have allowed U.S. tech giants such as Google, Facebook and Amazon to opt out of the scheme to impose a global minimum corporate tax.
Under current EU law, companies in the United States can declare profits from across the bloc in a single member state -- and most pick low-tax jurisdictions such as Ireland or the Netherlands.
U.S. Treasury Secretary Janet Yellen has told G20 officials that the Biden administration will drop Donald Trump's objections to new global digital tax rules
Trump's demand for a 'safe harbor clause' would have allowed U.S. tech giants such as Google , Facebook and Amazon to opt out of the global tax scheme
Nearly 140 countries have set a mid-2021 deadline to wrap up talks to modernize outdated rules on how much governments can tax cross-border commerce and set a global minimum corporate tax rate after negotiations nearly ground to a halt last year due to the U.S. proposal.
'Secretary Yellen announced that we will engage robustly to address both Pillars of the OECD project, and that the United States is no longer advocating for 'safe harbor' implementation of Pillar 1,' a U.S. Treasury official said.
Already challenging multilateral talks to reform global taxation 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 finance officials around the world had warned that the U.S. proposal could have allowed big U.S. companies like Amazon, Alphabet's Google and Facebook to opt out of whatever was agreed internationally.
Yellen's statement to G20 finance ministers and central bankers was widely welcomed by European officials.
German Finance Minister Olaf Scholz described the U.S. move as a major breakthrough that could pave the way for a broader deal.
German Finance Minister Olaf Scholz (left) and French Finance Minister Bruno Le Maire (right) applauded Yellen's move. Their countries stand to benefit the most from the new tax scheme
US President Joe Biden sits alongside US Treasury Secretary Janet Yellen earlier this month
'My U.S. colleague Janet Yellen told G20 finance ministers today that the United States would participate, and that the new regulations for fair international taxation should be binding for all companies,' he said in a statement after the meeting.
He said Yellen told the G20 officials that Washington also planned to reform U.S. minimum tax regulations in line with an OECD proposal for a global effective minimum tax.
French Finance Minister Bruno Le Maire, one of the most outspoken critics of the U.S. safe harbor proposal, echoed his praise.
'Finding an agreement by summer is within reach, especially now that the United States have confirmed they are dropping the safe harbor principle,' Le Maire said after the meeting.
In a letter to G20 officials released Thursday, Yellen underscored the Biden administration's commitment to multilateral discussions on the global taxation issue, 'overcoming disagreements, and finding workable solutions in a fair and judicious manner.'
Italy's finance minister Daniele Franco said the new U.S. stance should pave the way to an overarching deal on taxation of multinationals at a G20 meeting of finance chiefs in Venice in July.