July 13, 2021

By David Lawder

BRUSSELS (Reuters) -U.S. Treasury Secretary Janet Yellen told Reuters on Tuesday she was pleased by the European Commission’s decision to delay its announcement of a proposed EU digital levy because it will allow work to be completed on a global corporate tax deal.

Speaking to Reuters after meeting with European Union officials in Brussels, Yellen said it was prudent for the Commission to wait for the final parameters of the OECD ‘Pillar 1’ deal to reallocate taxing rights for large multinationals before proceeding with its own levy.

“I was pleased with their decision to delay introduction of this,” Yellen said in an interview. “We’re in the middle of trying to finalize an agreement. Countries have agreed to repeal, with Pillar 1, existing measures, and to avoid introducing future digital taxes that would be discriminatory.”

On Monday, the European Commission said it would delay its digital levy, eliminating a potential barrier to the broader global tax deal.

U.S. officials had said the idea of a new digital levy, proposed last year when tax negotiations looked stalled, was inconsistent with the OECD deal.

Among other officials, Yellen met with Irish Finance Minister Paschal Donohoe, one of the major holdouts from the tax agreement and whose buy-in will be crucial for the EU to approve the deal for a 15%-plus global minimum corporate tax.

“He’s head of the Eurogroup of (euro zone) finance ministers, he invited me to meet with them. Clearly he has a strong interest in the success of the EU,” Yellen said.

Yellen told local reporters in Brussels that she also spoke with the president and finance minister of Estonia, another EU country that has not signed up, and said she believed that these countries would ultimately support the agreement.

“My message is that this an agreement that is historic and very much in the interest of all countries, and it’s important that everyone try to get on board,” she said. “My sense is that those countries want to find a way to get to ‘yes’.”

Yellen said Ireland might have to raise its 12.5% corporate tax rate a bit, but would remain competitive globally given advantages such its well-educated workforce and excellent business environment.

The world’s 20 largest economies endorsed on Saturday a plan for a global overhaul of corporate tax that would introduce a minimum tax rate and change the way large companies like Amazon and Google are taxed, based partly on where they sell their products and services rather than on the location of their headquarters.

The reform, if finalised in October, would need parliamentary approval in the more than 130 countries that support it, including the U.S. Congress where it could face opposition from the Republicans. All EU member states must also approve tax reforms, including the envisioned global deal.

(Reporting by David Lawder; additional reporting by Andrea Shalal; Editing by Catherine Evans)

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