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Donald Trump has ordered authorities to develop retaliatory measures against countries applying “extraterritorial” levies on US multinationals, in a move that threatens to spark a global showdown over tax regimes.
The US president made the decision in an executive order late Monday, withdrawing US support for a global tax pact agreed at the meeting. OECD last year, which allows other countries to levy additional taxes on American multinationals.
He added that the “list of options for protective measures” should be drawn up “within 60 days”, putting signatories to the OECD pact on notice – including EU member states, the UK , South Korea, Japan and Canada – which Washington intends to do so far. -meet the challenges posed to global tax rules.
Asset clashed with European leaders during his first term as president over proposed digital taxes that would affect major U.S. tech groups such as Google owner Alphabet and Apple, at one point threatening France with tariffs .
His Monday order includes an investigation “whether any foreign countries are violating a tax treaty with the United States or have tax rules in place, or are likely to have tax rules in place that are extraterritorial or otherwise affect American companies are disproportionately affected.
Allie Renison, a former head of Britain’s Trade Department and now at SEC consultancy Newgate, said the move showed Trump was broadening the scope of “economic warfare” well beyond tariffs, in response to what the United States considers to be discriminatory practices by other countries. “Attacking their domestic tax regimes in defiance of previously global commitments shows Trump is getting creative in his fight to put America first,” she said.
“The net of economic warfare is ever-widening, far beyond just tariffs, and as governments begin to consider their response, concerns will now turn to what might be caught in the line the focus of retaliation – and the inevitable costs that flow from it.
The global agreement reached at the OECD in Paris in 2021 and introduced in part by several countries last year is expected to increase tax revenues of the world’s largest multinationals by up to $192 billion a year.
Under the “second pillar” of the OECD deal, if corporate profits were taxed at less than 15 percent in the country where the multinational is headquartered, signatories could potentially impose additional levies. But one part of these interrelated measures, known as the Undertaxed Profits Rule (UTPR), has long appealed to Republicans. angerwith the party labeling it “discriminatory“.
Grant Wardell-Johnson, global head of tax policy at accounting firm KPMG, said U.S. responses could include imposing additional taxes on foreign companies operating in the United States, or withholding taxes on payments to these jurisdictions.
“Ultimately, we see international taxation moving from a multilateral domain to a bilateral domain based on strong unilateral assertions. It’s a new tax world,” he added.
Alex Cobham, chief executive of the Tax Justice Network, an international campaign group, said Trump’s decision effectively left the OECD pact “dead in the water.”
In the two-part memo to the U.S. Treasury secretary, Trump first ordered that the Biden administration’s commitments to the OECD pact be rolled back — a move that had been widely anticipated — but later expanded the scope of the attack.
Cobham said the potential scope was not just about whether the OECD pact violated tax conventions, but also the extraterritorial potential of all tax rules in all countries.
“If you take that statement at face value, there is every chance that they will come back in 60 days and say that most of the world and most of the OECD member countries should be subject to the counter- measures they are talking about,” he said.
A senior European official said Trump’s billionaire tech entrepreneurs were pushing him to act on tax rather than trade. “The conversation about tariffs will be transactional, but the real fight will move to where fortunes are at stake and big tech has an interest,” they added.
Mathias Cormann, Secretary-General of the OECD, said: “US officials have expressed concerns to us about various aspects of our international tax agreement. »
He added that the organization would “continue to work with the United States and all countries around the table to support international cooperation that promotes certainty, avoids double taxation, and protects tax bases.”
The European Commission said it had taken note of Trump’s presidential memorandum. “For our part, we remain committed to our international obligations. . . and are open to meaningful dialogue with our international partners,” a spokesperson said.
Additional reporting by Laura Dubois