US President Donald Trump has announced withdrawal of the United States from the global minimum tax deal supported by over 100 countries.
A memorandum issued on January 20, 2025, notes that the global minimum tax deal supported under the Joe Biden administration not only allows extraterritorial jurisdiction over American income but also limits United States’ ability to enact tax policies that serve the interests of US businesses and workers.
The memorandum clarifies that the global minimum tax deal has no force or effect in the United States.
“The Secretary of the Treasury and the Permanent Representative of the United States to the OECD shall notify the OECD that any commitments made by the prior administration on behalf of the United States with respect to the Global Tax Deal have no force or effect within the United States absent an act by the Congress adopting the relevant provisions of the Global Tax Deal,” the memorandum states.
The memorandum adds: “The Secretary of the Treasury and the United States Trade Representative shall take all additional necessary steps within their authority to otherwise implement the findings of this memorandum.”
The global minimum tax, which is based on the Global Anti-Base Erosion (GloBE) Model Rules, ensures that large multinational enterprises pay a minimum level of tax (15 percent) on their income in each jurisdiction where they operate. The rules are aimed at reducing the incentive for profit shifting and bringing an end to the race to the bottom on corporate tax rates.
According to the memorandum, the Secretary of the Treasury in consultation with the United States Trade Representative shall investigate whether any foreign countries are not in compliance with any tax treaty with the United States or have any tax rules in place, or are likely to put tax rules in place, that are extraterritorial or disproportionately affect American companies.
The memorandum requires the Secretary of the Treasury to develop a list of options for protective measures or other actions that the United States should adopt or take in response to such non-compliance or tax rules.
“These executive threats might not work because Trump has performed badly at realizing retaliatory threats in the past in the context of digital services tax, and there is nothing to suggest that Trump will be able to scare away over 140 countries, including the EU. Of course, we may see some countries delay the implementation of the UTPR because that is what hurts the United States most,” Ashish Goel, international tax lawyer, said.
Reacting to US President Trump’s withdrawal from the OECD global agreement on a minimum global tax rate for multinationals, Pasquale Tridico, President of the European Parliament’s subcommittee on tax matters (FISC), said: “The US withdrawal from the OECD global agreement on multinational taxation, endorsed by 139 countries, is a significant setback. Trump’s decision benefits multinationals and ultra-billionaires who supported his campaign. The burden will fall on citizens and small to medium-sized enterprises, who will continue to face disproportionately higher taxes compared to large corporations.”
Tridico added: “Over a year ago, the EU introduced new rules mandating a global minimum effective tax rate of 15 percent for multinational companies operating within its Member States. Trump’s threats of retaliation should not deter us. Our duty is to serve the citizens and European companies, who are heavily penalized by tax evasion practices of large multinationals, particularly tech giants.”