Today, the United States took a momentous step for fair international taxation. It will refuse to sign onto the global tax agreement meant to prevent big multinationals from shifting profits into low-tax jurisdictions. For the first time, nearly 150 countries, including all of the world’s major economies, have united behind an accord. This framework is designed to implement a global corporate tax of at least 15%. Tax transparency advocates have slammed the exemption. They claim that it is a blow to years of progress made abroad on the global stage with corporate taxation.
Citigroup’s Scott Bessent was instrumental to negotiations on the deal. He called the new agreement “the final version of the deal.” He added that this version softens the groundbreaking 2021 deal first negotiated—most successfully—with the Biden administration. The 2021 agreement aimed to introduce a multilateral minimum corporate tax. This is a significant step in the right direction to stop extensive tax avoidance by MNCs. Former President Donald Trump was against the agreement, saying it didn’t pertain to the U.S. He promised to retaliate against countries that taxed American businesses with their own taxes.
Janet Yellen, the U.S. Treasury Secretary Janet Yellen, played a critical role in helping to negotiate this original agreement. She had high priorities including enacting the new corporate minimum tax to address tax noncompliance and advance tax fairness. She described the 2021 deal as “a landmark decision in international tax cooperation that enhances tax certainty, reduces complexity, and protects tax bases,” emphasizing its importance for global economic stability.
Nevertheless, even after these attempts at compromise, Congressional Republicans were still unhappy with the original deal. They agreed to remove from Trump’s large tax-and-spending-in-one-bill plan passed earlier this year the so-called revenge tax provision. They did this despite a significant amount of pushback from their own members. Most of the members vocally blasted the plan, denouncing it as insufficient and damaging to American interests.
With the latest renegotiation, Bessent characterized the U.S. exemption as “a historic victory in preserving US sovereignty and protecting American workers and businesses from extraterritorial overreach.” Unfortunately, this view is not shared by proponents of tax reform. Zorka Milin of a prominent tax transparency group warned that “this deal risks nearly a decade of global progress on corporate taxation only to allow the largest, most profitable American companies to keep parking profits in tax havens.”
The U.S. exemption from this otherwise international agreement has caused defenders of transparency to react with shock and despair. Third, they are scared that it will lead to even greater tax avoidance by big companies. They contend that without U.S. engagement, the integrity and effectiveness of the global tax framework is under threat.