Trump Declares OECD Global Tax Deal Null in US

WASHINGTON, January 24, 2025 – In a decisive movement ​shortly after its inauguration, President Donald Trump officially declared that the Organisation ​for Economic ​Cooperation and ​Development (OECD) Global Tax Deal, a historic agreement negotiated in ​2021, has no “force or effect” in the United States. This memorandum, issued on January 20, 2025, marks a significant change in U.S. tax policy, deactivates commitments made under the ​administration of Biden and directs federal agencies to take measures to protect against discriminatory tax practices abroad.

What is the OECD Comprehensive Tax Agreement?

OECD Global Tax This agreement ​was the culmination of years of negotiations to limit ​the tax evasion of multinational companies. The ​agreement, supported by nearly 140 countries, introduced ​a global minimum corporate tax rate of 15% to deal ​with the “change in erosion and profit” ​(BEPS). It has also tried to reallocate tax ​duties by ensuring that large companies pay taxes ​in countries where they earn significant income, regardless of their ​physical presence.

Although ​widely adopted ​by the countries of the European Union, Britain and other major economies, the United States Congress has not passed ​legislation to align United States ​tax policies with the ​agreement. This inaction has made US ​companies vulnerable to additional ​taxes ​abroad, and other countries have proposed to impose “high-level taxes” ​corresponding to the overall minimum rate.

What does the Memorandum state?

The memorandum unequivocally states ​that the global tax pact undermines the sovereignty and economic competitiveness ​of the United States. President Trump argues ​that the agreement allows extraterritorial jurisdiction over U.S. income ​and limits the country’s ability to adopt fiscal policies that benefit U.S. businesses ​and workers.

According to the ​memorandum, “Because of the Global Tax Deal ​and other discriminatory foreign tax practices, U.S. companies can face international ​tax retaliation if the U.S. fails to meet foreign tax policy objectives.” The memorandum further states that the commitments made by the previous administration do not have a legal position ​unless Congress explicitly adopts the provisions of ​the ​agreement.

How will this affect American companies?

US companies operating abroad have important implications. Under the OECD agreement, countries that adopt the global ​minimum tax may impose additional ​taxes ​on U.S. companies ​that ​pay less than ​15% in their country. ​For example, companies benefiting from national tax credits, such as incentives ​for research ​and development, ​may find ​that these benefits are undermined by high foreign taxes. ‘

According to ​Reuters, the government’s decision to withdraw from the agreement could revive disputes ​over digital services taxes imposed by countries such as France, Italy ​and ​the United ​Kingdom. These taxes are mainly intended for US technology giants, including Apple, Meta and Amazon. Without US participation in OECD discussions, the likelihood ​of such unilateral measures leading to Washington retaliatory rights increases.

What measures are being taken?

The memorandum is addressed to ​the Secretary ​of the Treasury, ​in collaboration with the United ​States Trade ​Representative, to ​assess fiscal policies in other ​countries. Specifically, ​they are ​responsible for investigating ​a country’s non-compliance with existing tax treaties or ​for ​enforcing tax rules that disproportionately affect U.S. businesses.

The Treasury received 60 days to ​develop and ​present a series of “protection measures” or other actions. These measures are designed to protect U.S. companies from unfair tax practices while ​maintaining the integrity of U.S. tax treaties. In particular, the memorandum stresses the importance of protecting the economic ​competitiveness ​of US companies at the global level.

Why is the global tax agreement controversial?

Critics of the OECD agreement argue that it imposes undue restrictions on national ​tax sovereignty. By establishing a ​global minimum tax rate, countries are losing ​flexibility to ​adapt tax incentives to attract foreign investment or ​promote domestic industries.

Former Treasury Secretary Janet Yellen, who defended the agreement under the Biden presidency, highlighted his role in preventing a “low run” in corporate tax rates. However, the Trump administration sees the ​agreement as a threat to ​the interests of the United States, especially given the possibility of retaliation against American companies.

According to ​the Proskauer Parler tax, the memorandum also raises questions about ​the status of the IRS’s Global Tax Agreement guidelines. It is not clear whether previously issued notices, such as IRS 2025-4, ​will be revoked in light of the new regulatory address.

And then what?

The collapse of US participation in OECD negotiations could lead to a fragmentation of the ​global tax landscape. Countries ​that had previously deferred digital services taxes ​in favour of the OECD framework could re-establish these ​measures. This would create serious ​compliance problems for multinational companies and could exacerbate trade tensions.

The experts ​suggest that the management ​approach reflects a broader strategy to prioritize US economic sovereignty over multilateral agreements. ​While ​this may enhance the flexibility of national policies, it ​may ​isolate the United States from global tax cooperation efforts. Companies and stakeholders are advised to monitor developments closely, particularly as Treasury findings and recommendations ​are made ​in the coming months.

President Trump’s memorandum highlights an ​important change in the US approach to international tax ​policy, giving priority to national sovereignty and competitiveness ​over global ​agreements. The consequences for multinationals, ​tax treaties and international relations ​will continue ​to be ​implemented, shaping the economic landscape for years.