Trump Withdraws America from the Minimum Corporate Tax Agreement

The world’s largest economy is no longer part of the global corporate tax agreement aimed at standardizing tax treatment worldwide and reducing the effect of corporate profit shifting to tax havens. According to Reuters, among the dozens of orders signed by new U.S. President Donald Trump on Monday is one stating that the global minimum corporate tax agreement ‘has no force or effect’ in the U.S. This pulls America out of a significant agreement reached in 2021 that the Biden administration negotiated with nearly 140 countries.

Trump, in a presidential memorandum issued a few hours after taking office, also instructed the U.S. Treasury Department to prepare options for ‘protective measures’ against countries that have – or are likely to – implement tax rules that disproportionately affect American companies. The European Union, the United Kingdom, and other countries have adopted a global minimum corporate tax rate of 15 percent, but the U.S. Congress has never approved measures to align U.S. tax regulations with it. The U.S. has a minimum corporate tax rate of 10 percent, which was part of Trump’s significant tax cut package approved by Republicans in 2017.

However, countries that have adopted the global minimum tax have the option to charge an additional amount up to that 15 percent from American companies that pay a lower rate. Trump’s memorandum referred to such actions as ‘retaliation.’ – This memorandum restores the sovereignty and economic competitiveness of our nation by clarifying that the Global Tax Agreement has no force or effect in the United States – states Trump’s order.

It is worth noting that reaching this agreement was not straightforward. After years of stalled negotiations on global tax issues led by the Organization for Economic Cooperation and Development (OECD) to end the long-standing ‘competition’ among countries to offer more favorable tax environments for foreign companies, former U.S. Treasury Secretary Janet Yellen agreed to the deal in October 2021. Trump’s nominee for Treasury Secretary, Scott Bessent, said on Thursday that implementing the global minimum tax agreement would be a ‘serious mistake.’

The second part of the negotiations initiated by the OECD was aimed at a new agreement on taxing large, profitable multinational companies in the countries where their products are sold. The idea is to replace a series of unilateral digital services taxes primarily targeting American tech companies, such as Meta or Apple. However, these so-called ‘Pillar 1’ negotiations have largely stalled, and without U.S. participation.