Global digital tax reform

Marking a significant shift in international economic policy, Janet Yellen, the US Treasury secretary, has informed G20 finance ministers on 26^th February 2021 that the US is no longer supporting the digital tax ‘safe harbour’ measure implementation, asserted in 2019 by the administration of the former US President, Donald Trump.

The ‘safe harbour’ measure was raised by the Trump administration in objection to the EU-proposed digital tax measures, as discriminatory against the Silicon Valley. However, the implementation of the ‘safe harbour’ measure would enable the technology companies to comply with any agreement on a voluntary basis, which was disputed by multiple EU member states. Subsequently, the EU has been considering imposing levies on large technology companies, in an attempt to prevent them from paying minimal or no tax on sales.

The change of stance of the US brings about an improvement in transatlantic relations, and is regarded as an encouraging development in concluding the agreement on digital tax, as stated by German Federal Minster of Finance, Olaf Scholz.  It is expected that the multilateral negotiations for reform of global digital taxation rules at the Organisation for Economic Co-operation and Development (OECD) may resume in the near future, focusing on two pillars of the project – the tax challenges of digitization and a robust minimum global tax.

Italian Minister of Economy and Finance, Daniele Franco, noted that a solution may be reached by mid-2021, though it remains to be seen – as there is still much to do before a new global tax regime can be introduced.

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