Image via iStockClick play to hear this article from Amazon PollyWashington may have fallen in love with Big Tech. The United States supported Silicon Valley over the rest when it came to overhauling the world's tax system.The U.S. government stopped a large European push to make Google, Facebook and Amazon pay more into their national coffers. Washington was able to convince countries to agree to a tax system that would require the largest digital companies to pay more tax wherever they have operations.These negotiations, which are being overseen by the Organisation for Economic Cooperation and Development ("OECD"), will be concluded on Thursday. While negotiations are ongoing, Silicon Valley and the U.S. are on track to avoid worst-case scenarios than initially appeared possible. This includes national taxes in countries such as France and the U.K. which would have only targeted American tech companies.The Group of 20s finance ministers are expected to approve the new system on July 9. It will also establish a global minimum rate of about 15% to prevent multinational companies from searching for tax-free jurisdictions.The upcoming global tax announcement in Washington is already being seen as a win for America's economy. It is a continuation of a long-standing strategy that has bipartisan support to oppose other countries' efforts to tax more revenue from Silicon Valley's largest names that would otherwise go into U.S. coffers.It has a huge impact on the country if we can get rid of discriminatory taxes. I have made it clear that the Biden administration must get it done, U.S. POLITICO was informed by Senator Ron Wyden (D.Ore.), who is the Chair of the Senates Finance Committee.Big Tech disrupts the tax systemThe tax agreement will see the U.S.'s largest tech companies pay more overseas tax. This complex formula will mean that profits above a certain threshold will be split among countries.The expansion of the global tax overhaul to include the entire economy and the digital world was a major victory for Silicon Valley and the U.S. policymakers. This avoids a European Union charge to levy new levies on tech giants. The new agreement will make it clear that the German carmaker Volkswagen and the British bank HSBC are equally liable for paying up as Google and Facebook.Many EU leaders believe that the U.S. tech companies benefited disproportionately from the COVID-19 crisis. This was because so much of our daily lives were now online. U.S. tech firms argue that it is unfair to pick one sector when the entire economy becomes increasingly digitalized each year.Megan Funkhouser is the director of tax policy and trade at the Information Technology Industry Council. This trade group includes members such as Amazon, Google and Microsoft.According to independent analysts, tax officials, trade groups, and tax professionals, the culmination of years-long negotiations in these days highlights how tech sector, which has already reshaped large parts of the global economic system, was a catalyst for disrupting the international tax system.We are at a point when it is bigger than tech, stated Sam Rizzo (director of policy at ITI), the trade group in reference to the global tax negotiations. It's about what is a U.S.-based sustainable tax policy.The U.S. has transformed initial attempts to make profits from digital advertising and other services that were often left in low-tax countries like Ireland or Luxembourg into a global tax overhaul. This will have a profound impact on almost all industries and capitals around the world.The U.S. did nothing but jumpstart the negotiations, according to William Reinch, a senior advisor to the Center for Strategic and International Studies in Washington and a former Clinton-era official. These talks will be close to the wire. They can be a turning point if they are successful.Unified frontSilicon Valley continues to fight U.S. policymakers across multiple fronts, including their role in enabling election-related misinformation spread and alleged abuses of market dominance.When it came to tax policy, policymakers ignored these fights. They have been open to technology giants in recent months. These companies provided updates on digital taxes around the world and suggested ways that the U.S. could intervene to help them.The reason for the detente is that on taxes, U.S. policy and Big Techs interests align.Washington wants to keep the lion's share of these highly profitable companies' tax, which means other countries wont have to levy their own digital taxes.One Democratic aide said that it is not that they're tech companies but that they're American companies. He spoke under anonymity. There is a very successful, important, and profitable industry that almost only is American. It is hard to imagine another industry in which the U.S. holds such a strong position.According to seven executives, congressional aides and representatives of trade bodies, U.S. and tech officials regularly exchange memos on tax issues. Many spoke anonymously because they weren't authorized to discuss the interactions publicly.Global digital tax conversations are distinct from ongoing discussions on content moderation, privacy, and antitrust. These people stated that there is little to no cross-pollination between these issues. They also said that executives from companies who deal with tax policy are often not able to handle tech issues.It is a good thing that tax policy falls under the U.S. Congress finance committees and not panels that oversee privacy or Big Techs content legal liability protections.American officials consider unilateral digital taxes in other countries discriminatory and have threatened to impose tariffs worth billions of dollars if they don't back down. That message has been promoted by tech executives, who warned international policymakers that they could start a transatlantic trade war if their domestic taxes are not pursued.Sharing intelligenceAccording to those who spoke under anonymity, the U.S. Treasury has kept industry informed in ongoing talks. However, tech officials have shared details of their conversations with international policymakers.For example, in late 2020 tech companies alerted Capitol Hill staffers to the fact that France began collecting digital service taxes. They had promised to postpone it while international negotiations continued.The companies wouldn't have known until they said, Hey just to let you know, we received a bill from France, stated another Democratic aide who spoke under anonymity.According to Freedom of Information requests submitted by POLITICO to the Irish government, OECD experts as well as politicians from countries that are business-friendly like Ireland, home to many international companies, have met regularly with tax experts from Microsoft and Facebook over the past two years to discuss ongoing international negotiations.Nick Clegg from Facebook's global public policy team said that one of my teams has been providing technical inputs for the OECD Secretariat over the past two years to help them sort of figure out how to do it. It is clear what our interests are, and I have a personal interest in having non-discriminatory rules that are uniformly applied and easy to follow.Washington has made its support public for the tech sector.The Office of the United States Trade Representative (USTR), which began its investigation into France's digital service taxes in 2019, had eight of the 10 witnesses present at the public hearings. At least one of the largest tech companies was represented by at least one of the 10 attendees. Jennifer McCloskey was ITIs vice-president of policy and later became senior tax manager at Google in 2020. She continues to work on this issue.ACT is a lobby group that counts Apple among its members.Despite their differences in political views, Biden and Trump almost shared the same digital tax policies. However, the new administration dropped the proposals of Biden's predecessor, which would have made the global tax overhaul only voluntary for all companies.All companies are subject to taxThe beginning of April marked a turning point in years-long tax negotiations.The U.S. revealed a plan to revive the stuttering negotiation process that had descended into tit for tat threats from European capitals about unilateral digital taxes and Washington about imposing retaliatory tariffs on foreign companies.According to three people involved in the discussions, the Biden administration sought to simplify the global tax overhaul by focusing on large firms with revenues at least $20 Billion and profit margins greater than 10 percent.Both sides conceded.France objected to Amazon's profit margins below 10 percent being included in the new system. Negotiators modified the deal so that profitable business units of a company would be included, even though its overall profit margin wasnt cut. This allowed Amazon Web Services, the cloud business of the company, to be included in the proposed deal, even though the overall profit margin for the e-commerce giant was below 7 percent.The United Kingdom worked hard to ensure that its financial services sector, which is in direct competition with New York's, was kept out of the pact. Officials from the United States argued that, even if U.S. tech firms were included, other high-profile industries should be.According to officials familiar with the ongoing negotiations, negotiators are still working out the tax deal. It is expected that it will be announced on Thursday. However, details could still change.As the hours tick down to an agreement, Washington and Silicon Valley are the ones that have the most reason to celebrate.The overall tax overhaul will include some tech companies from the United States. Other countries that are industrial leaders will have to pay more. This is because, in order to convince the U.S. to agree to the global agreement, most-European policymakers had given up their desire to target Big Tech by imposing new digital levies.Integrity is a virtue. They'll say that all companies are in for whatever criteria they finally adopt and let the chips drop where they may," said Peter Barnes, a tax lawyer at Caplin and Drysdale. He was previously the senior international tax counsel for General Electric. This is the only way to ensure a deal lasts.POLITICOPOLITICO
