Donald Trump threatens tax war over US multinationals

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Donald Trump has ordered officials to take retaliatory measures against countries that apply “extraneous” tariffs on US multinationals, a move that threatens to trigger a global clash over tax measures.

The US president made the move in an executive order on Monday night, withdrawing US support for the global tax treaty OECD Last year that allowed other countries to impose top-up taxes on US multinationals.

He added that a “list of safeguards options” must be drawn up “within 60 days”, noting that signatories to the OECD agreement – including EU member states, the UK, South Korea, Japan and Canada – that Washington wants so far. – Meeting the challenges of global tax rules.

Trump His first term as president clashed with European leaders over a proposed digital tax that would affect major US tech groups such as Google owner Alphabet and Apple, at one point threatening France with tariffs.

His order on Monday included investigating “whether any foreign country is not in compliance with any tax treaty with the United States or has any tax rules, or is likely to establish tax rules, that affect American companies overseas or disproportionately.”

Ally Rennison, a former UK trade official, now at consultancy SEC Newgate, said the move showed Trump was widening the “economic warfare” net beyond tariffs in response to what the US sees as discriminatory practices by other countries. “Following their domestic tax system behind global commitments so far shows that Trump is getting creative in his fight to keep ‘America first,'” he said.

“The web of economic warfare is extending well beyond just tariffs, and as governments begin to consider their response, concerns will now turn to what else might be caught in the retaliatory crosshairs — and the inevitable costs that might go with it.”

The global deal, agreed at the Paris-based OECD in 2021 and partially implemented by several countries last year, was expected to take up to $192 billion a year in taxes from the world’s biggest multinationals.

Under “pillar two” of the OECD agreement, signatories could potentially charge top-up duties if corporate profits were taxed below 15 percent in the country where the multinational was headquartered. But one part of the interlocking system, known as the Undertaxed Profits Rule (UTPR), has long been Republican. angerparty label it “discriminatory“

Grant Wardell-Johnson, global head of tax policy at accountants KPMG, said US responses could include imposing additional taxes on foreign-owned businesses operating in the US, or withholding taxes on payments to those jurisdictions.

“Finally we see international taxation moving from a multilateral domain to a bilateral one based on strong unilateral claims. It’s a new tax world,” he added.

Alex Cobham, chief executive of the Tax Justice Network, an international campaign group, said Trump’s move left the OECD deal “dead in the water”.

In a two-part memo to the US Treasury secretary, Trump first ordered that the Biden administration’s commitments to the OECD agreement be withdrawn – a move that was widely expected – but then broadened the scope of the attack.

Cobham says the potential scope is not just whether the OECD agreement violates the tax treaty, but on the potential externalities of all tax rules in all countries.

“If you take this statement at face value, within 60 days they should come back and tell most counties around the world and most OECD member countries to be subject to the countermeasures they are talking about”.

A senior EU official said Trump’s billionaire tech entrepreneurs are pushing him to deal with taxes rather than trade. “The tariff conversation will be transactional but the real fight will go where fortunes are at stake and big tech interests are,” they added.

OECD Secretary-General Matthias Cormann said: “US representatives have raised concerns with us about various aspects of our international tax treaty.”

He added that the agency “will work across the table with the United States and all countries to support international cooperation that promotes certainty, avoids double taxation and protects tax bases”.