Yellen talks digital taxes with U.K., Germany in initial calls

U.S. Treasury Secretary Janet Yellen on Wednesday talked with her U.K. and German counterparts about resolving mushrooming disputes over the taxation of internet giants such as Facebook Inc., highlighting the issue as a priority in her initial bilateral calls.

Yellen and U.K. Chancellor of the Exchequer Rishi Sunak “discussed the need to find multilateral solutions to many of the issues facing the global economy, including addressing the tax challenges of efficiently and equitably taxing the income of multinational firms,” according to a U.S. Treasury statement on Wednesday.

The U.K. Treasury, in its statement, said the pair discussed seeking a “global solution on tax challenges created by digitalization of the economy.”

Yellen during a call with German Finance Minister Olaf Scholz said the U.S. would actively participate in discussions to “forge a timely international accord” on taxation, according to a separate U.S. Treasury statement. The pair also discussed the importance of the U.S.-German and transatlantic partnerships, and agreed to cooperate on issues including ending the pandemic, economic recovery, income inequality and climate change, the statement said.

Earlier this month, before President Joe Biden took office, the U.S. added Austria, Spain and the U.K. to the string of countries it says are discriminating against American companies through their decisions to tax local revenue of big online firms such as Facebook, but stopped short of announcing retaliatory tariffs. The office of the U.S. Trade Representative had previously issued similar findings against India, Italy and Turkey.

Brokering deal

Wednesday’s statements suggest that the international community could move closer to reaching an agreement about who can tax Facebook and other technology giants including Amazon.com Inc. and Alphabet Inc.’s Google.

The Organization for Economic Cooperation and Development is trying to broker an agreement by midyear among nearly 140 countries on a global overhaul to address concerns about how international tech giants are taxed. Pascal Saint-Amans, director of the OECD’s Center for Tax Policy and Administration, said Tuesday he believes that Yellen brings a more “constructive approach” to reach a deal this year than the Trump administration did.

Yellen last week told the Senate Finance Committee that she would “immediately and vigorously” engage with the international tax negotiations at the OECD. She also said that retaliatory tariffs impose costs on American households — a sign she would be less willing than the Trump administration to recommend import taxes as a tool.