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President Donald Trump declared on Monday (20 January) that the global corporate minimum tax deal “has no force or effect” in the US, effectively withdrawing America from the 2021 agreement negotiated by the Biden administration with nearly 140 countries.
In a presidential memorandum – which was issued hours after taking office – Trump also ordered that the US Treasury prepare options for “protective measures” against countries that have, or are likely to, put in place tax rules that “disproportionately” affect American companies.
The US congress has yet to approve measures to align with the 15% global corporate minimum tax, which has been adopted by the EU, Britain and other countries.
Currently, the US has an approximately 10% global minimum tax as part of Trump’s 2017 tax cut package approved by Republicans.
Trump’s memorandum also called actions “retaliatory” if countries that have adopted the 15% global minimum tax collect a “top-up” tax from US companies paying a lower rate.
The memo read: “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.
“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.”
It comes after the October 2021 agreement, spearheaded by former US treasury secretary Janet Yellen, ended years of deadlocked negotiations at the Paris-based Organisation for Economic Cooperation and Development (OECD). These discussions had centered around curbing the practice of competitive corporate tax rate reductions on a global scale.
However, Trump’s treasury nominee Scott Bessent said last Thursday (16 January) that following through with the global minimum tax deal would be a “grave mistake”.
OECD negotiations for a new tax sharing arrangement on large multinational companies have stalled. The effort was aimed at replacing unilateral digital services taxes that target largely American technology firms, from Facebook to Apple.
Without US participation, countries like Britain and France may reinstate their digital taxes, risking retaliatory tariffs from the US.
