Trump backs out of global minimum tax agreement

President Donald Trump wasted no time on the first day of his presidency, signing a flurry of executive orders straight from a desk at the Capitol One Arena in Washington, DC.

Among Trump’s first executive actions in his second term was pulling out of an international corporate minimum tax agreement. More than 135 countries agreed to a deal in October 2021 that set a global minimum tax rate of 15%, according to the Organization for Economic Co-operation and Development (OECD). The US signed onto the agreement but Congressional leaders didn’t pass anything to bring the country “into compliance with it,” Reuters reported.

The deal “not only allows extraterritorial jurisdiction over American income but also limits our Nation’s ability to enact tax policies that serve the interests of American businesses and workers,” the executive order states.

Under the global tax deal’s Pillar Two framework, countries can charge a “top-up tax” to companies that pay an effective tax rate below the 15% global minimum. The Trump executive order directs the US Treasury secretary to investigate any “discriminatory” tax regimes and present to the president “a list of options for protective measures or other that the United States should adopt or take in response to such non-compliance or tax rules.”

Scott Bessent, Trump’s nominee for Treasury secretary, warned other countries against implementing retaliatory taxes during his recent Senate confirmation hearing.

“I believe that any, especially European country, but any country that in the next few days before President Trump takes office is intent on implementing Pillar Two will find it a grave mistake,” Bessent said, adding “the taxation of US companies is a sovereign issue and that authority lies with this Congress.”