Ahead of the G20 finance ministers meeting, U.S. Treasury Secretary Janet Yellen announced that the Biden administration is no longer insisting on the ‘safe harbor’ implementation of Pillar 1 of the OECD’s reform of global taxation. The ‘safe harbor’ provision would let some companies opt out of the new global digital tax regime. Countries like Germany, France, and the European Union that strongly opposed the safe harbor provision, cheerfully welcomed the unilateral concession and announced that an agreement could be reached by the summer.
The following statement can be attributed to Grover Norquist, President of Americans for Tax Reform:
In recent years the world has seen the growing threat of digital services taxes, which –by narrowly defining revenue thresholds and business models–are, designed to target American companies exclusively. These countries are trying to cheat on the existing international rules of taxation by unilaterally laying claim to income that would otherwise be taxed in the United States. Digital services taxes pose unprecedented dangers to tax competition, innovation, American and worldwide economic growth and represent a dramatic and likely irreversible shift for the international tax system.
The OECD process was initiated initially to end these unilateral and discriminatory taxes and prevent a trade war from escalating further. The upcoming meeting of G20 finance ministers is an excellent opportunity for the representatives from France, the UK, India, Indonesia, Canada, Germany, Italy, and other countries that either have already imposed those taxes or have DST legislation in place, to show that they are negotiating in good faith and commit to ending those discriminatory tax measures.
The Biden administration should insist on the termination of those digital services taxes and other discriminatory measures before an agreement that is fair to the United States, American companies and workers, can be reached at the OECD. It is crucial to keep in mind that big-spending EU bureaucrats are already resorting to regulatory and antitrust tactics like the Digital Markets Act and Digital Services Act to undermine U.S. innovation and make American companies subsidize their never shrinking budgets through fines and restrict their ability to compete in the European marketplace.
Secretary Yellen and the Biden administration should not sacrifice American interests, American technological leadership, American jobs, and the American tax base by making damaging unilateral concessions during this process.