United States to pull out of global corporate tax deal

PRESIDENT Donald Trump on Monday declared that a global corporate minimum tax deal “has no force or effect” in the US, effectively pulling America out of the landmark 2021 arrangement negotiated by the Biden administration with nearly 140 countries.

Trump, in a presidential memorandum issued hours after taking office, also ordered the US Treasury to prepare options for “protective measures” against countries that have — or are likely to — put in place tax rules that disproportionately affect American companies.

The European Union, Britain and other countries have adopted the 15% global corporate minimum tax, but the US Congress never approved measures to bring the US into compliance with it. The US has a roughly 10% global minimum tax, part of Mr. Trump’s landmark 2017 tax cut package approved by Republicans.

But countries that have adopted the 15% global minimum tax may be in a position to collect a “top-up” tax from US companies paying a lower rate. Mr. Trump’s memo referred to such actions as “retaliatory.”

“Because of the Global Tax Deal and other discriminatory foreign tax practices, American companies may face retaliatory international tax regimes if the United States does not comply with foreign tax policy objectives,” the memo reads.

“This memorandum recaptures our Nation’s sovereignty and economic competitiveness by clarifying that the Global Tax Deal has no force or effect in the United States.”

After years of stalled negotiations on global tax issues hosted by the Paris based-Organization for Economic Cooperation and Development (OECD) to end competitive reductions in corporate tax rates, former US Treasury Secretary Janet Yellen agreed to the deal in October 2021.

Mr. Trump’s Treasury nominee Scott Bessent said on Thursday that following through with the global minimum tax deal would be a “grave mistake.”

Another part of the OECD negotiations were aimed at a new arrangement to share taxing rights on large, profitable multinational companies with countries where their products are sold. The effort was aimed at replacing unilateral digital services taxes that target largely American technology firms from Meta Platforms’ Facebook to Apple.

But these so-called “Pillar 1” talks have largely stalled, and without US participation, countries including Italy, France, Britain Spain and Turkey may be tempted to reinstate their digital taxes, risking retaliatory tariffs from Washington. — Reuters