Gutting OECD Pillar II Tax Deal

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In one of his first official acts, President Trump issued a memorandum effectively withdrawing the United States from the global corporate minimum tax deal negotiated through the Organization for Economic Cooperation and Development (OECD). The 15 percent minimum tax, agreed upon in 2021, had not been implemented in U.S. law.

President Trump stated that the OECD agreement “limits our Nation’s ability to enact tax policies that serve the interests of American businesses and workers,” asserting that it has “no force or effect in the United States.”

House Ways and Means Committee Chairman Jason Smith (R-Mo) praised the action, noting his intention to reintroduce the Defending American Jobs and Investment Act. That legislation would impose an additional 5 percent tax rate annually for four years on U.S. income of entities in jurisdictions that adopt an undertaxed payments rule.

The U.S. federal corporate tax floor remains 10 percent, potentially exposing U.S. multinationals to "top-up" taxes abroad under Pillar II rules.

The administration’s memorandum also directs the Treasury Secretary and U.S. Trade Representative to examine possible “protective measures” against any foreign tax rules deemed discriminatory toward U.S. companies. So far, neither Pillar II nor the related Pillar I digital tax provisions have been adopted by Congress.

Section 891

As part of his "America First" trade policy the President calls for the use of an obscure tax rule to impose punitive taxes on foreigners and their companies in the US for tax treatment it considers discriminatory or extraterritorial.  The rule calls for a doubling of tax rates in retaliation.

Taiwan Tax Relief  Advances in Senate

Key senators have introduced legislation already passed in the House to provide double-tax relief with Taiwan. The legislation  also would authorize the President to negotiate a tax agreement with Taiwan to provide broader bilateral tax relief.

The bill was approved by the House last week. “Taiwan’s unique status requires a unique tax solution,” the two Finance members said. “This legislation strengthens the economic partnership between the US and Taiwan by delivering treaty-like tax benefits for American and Taiwanese workers and businesses operating across our borders.”

The legislationis was introduced by Senate Finance Committee Chairman Mike Crapo (R-Idaho) and ranking Democrat Ron Wyden (Ore) and Senate Foreign Relations Committee Chairman Jim Risch (R-Idaho) and ranking Democrat Jeanne Shaheen (NH).

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