The US dropped a key requirement in digital tax negotiations for technology companies, eliminating an important factor that strained trade relations between Europe and the US and hindered reaching international agreements.

A US Treasury Department spokesperson said that Treasury Secretary Janet Yellen said at the G20 virtual meeting that the US no longer requires so-called safe harbor rules, that is, US companies are allowed to choose not to pay taxes abroad.

The spokesperson said Yellen said that the US will now actively negotiate this issue and the global minimum tax rate.

Negotiations on tax reform in about 140 countries around the world were blocked last year, when the Trump administration insisted on a safe harbor system. Most other countries have indicated that they do not accept this tax option.

“Today, we are seeing a strong impetus in the fair taxation of large digital companies,” said German Finance Minister Olaf Scholz. “My American colleague Jeanette Yellen announced today at the G20 finance ministers' meeting that the US will join.”

There is still a long way to go to reach a global agreement on a digital tax. Apart from the safe harbor issue, the US and Europe have always been at odds over the scope of the new regulations. Furthermore, there are unresolved issues such as profit distribution issues in different jurisdictions and how to ensure and enforce tax certainty.