UK and International Tax news

US To Withdraw From OECD Global Tax Deal

Wednesday 29th January 2025

Following the inauguration of President Trump, and the signing of over 100 executive orders, the White House has issued a Memorandum which, in Section 1, requires the Treasury Secretary and the US Permanent Representative to the OECD to notify the OECD that any commitments made by the prior administration on behalf of the US with respect to the Global Tax Deal have no force or effect within the US in the absence of an act by Congress adopting the relevant provisions of the Global Tax Deal. The Secretary of the Treasury and the US Trade Representative are to take all additional necessary steps within their authority to otherwise implement the findings of the Memorandum.

Section 2 of the Memorandum refers to Options for Protection from Discriminatory and Extraterritorial Tax Measures.  This provides for the Secretary of the Treasury in consultation with the US Trade Representative to investigate whether any foreign countries are not in compliance with any tax treaty with the US or have any tax rules in place, or are likely to put tax rules in place, that are extraterritorial or disproportionately affect American companies, and develop and present to the President, through the Assistant to the President for Economic Policy, a list of options for protective measures or other actions that the US should adopt or take in response to such non-compliance or tax rules within 60 days.

In its introduction, the Memorandum refers to the OECD Global Tax Deal not only allowing extraterritorial jurisdiction over US income but also limits the US’s ability to enact tax policies that serve the interests of US businesses and workers. As a consequence of the Global Tax Deal, and other discriminatory foreign tax practices, US companies may face retaliatory international tax regimes if the US does not comply with foreign tax policy objectives.

The Memorandum appears to target, in Section 1, Pillar Two’s undertaxed payments rule and digital services taxes though other taxes may also be in scope.

With regard to section 2, there is an existing provision in the US Tax Code (s.891) which provides that US taxes may be doubled on citizens and corporations of countries if the President finds that there has been discriminatory or extraterritorial taxation of US citizens or corporations.

If you would like more information on the above, please contact Keith Rushen on 0044 207 4862378.

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