Global negotiations on taxing the digital economy should focus on “reallocating out of above-normal profits,” according to a Treasury Department official.

“It will be much easier to get an agreement to reallocate a certain amount of revenues among jurisdictions if we focus on reallocating out of above-normal profits,” said Lafayette “Chip” G. Harter, deputy assistant secretary of international tax affairs at Treasury.

Such an approach would result in “more openness and flexibility” from countries because it wouldn’t dramatically change...