Yellen OKs Global Tax on Big Tech
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After years of kicking and screaming, it’s Yellen that appears poised to solve the global tax conundrum.
Treasury Secretary Jannet Yellen has told fellow G20 finance ministers the U.S. will drop a contentious “safe harbor” provision that would have allowed U.S. tech giants to opt-out of global tax treaties.
Digital Tax Background
Under the current tax construct, companies pay taxes based on where they “create value.” For far-reaching tech companies like Facebook and Amazon – that has meant paying a relatively little amount of tax in Europe – despite facilitating plenty of “likes” and delivering many-a-corrugated-box in the old continent.
That reality has long-irked countries like France and the UK, each anxious to get their perceived fair share of the digital pie.
The Solution: The Organization for Economic Cooperation and Development is leading a two-pronged initiative that will 1) redefine where corporate income is taxed and 2) impose a minimum tax.
- In 2019, former treasury secretary Steve Mnuchin proposed the “safe harbor” that would have made it voluntary for U.S. tech giants to comply with the international treaty.
- That stance led to a large string of tit-for-tat rhetoric and proposed tariffs and taxes.
The Yellen 180 was met with enthusiasm from international leaders. Benjamin Angel, a senior tax official at the European Commission, tweeted an agreement has a “real chance to make it!”
The battle for digital dollars is heating up all across the globe – Maryland just became the first state to enact a tax on digital advertising.