Nearly 150 countries have reached a significant agreement aimed at curbing the practice of large global corporations shifting profits to low-tax jurisdictions. However, a key exception has been made for the United States, much to the dismay of tax transparency advocates.
The plan, finalized by the Organisation for Economic Cooperation and Development (OECD), allows large multinational corporations based in the US to be exempt from the proposed 15% global minimum tax. This exemption emerged after protracted negotiations during the Trump administration, emphasizing a clash of priorities among the G7 nations.
OECD Secretary-General Mathias Cormann hailed the agreement as a “landmark decision in international tax cooperation,” underscoring its potential to enhance tax certainty, reduce complexity in tax obligations, and protect national tax bases. In support of the deal, Scott Bessent, the US treasury secretary, framed it as a “historic victory” for US sovereignty, asserting that it safeguards American workers and businesses from what he termed extraterritorial overreach by other nations.
The revised agreement softens the original framework established in 2021, which aimed at implementing a minimum global corporate tax of 15%. The initiative was designed to deter multinational giants, such as Apple and Nike, from leveraging complex accounting practices to shift profits to countries with minimal or nonexistent tax rates, such as Bermuda and the Cayman Islands—regions where these corporations often maintain little actual business presence.
Former President Donald Trump expressed strong opposition to the 2021 agreement negotiated by the Biden administration, arguing that it was unsuitable for the United States. The Trump administration threatened retaliatory measures against countries that imposed taxes on US companies, further complicating international tax negotiations.
Janet Yellen, who served as treasury secretary under President Biden, played a pivotal role in advocating for the original OECD global tax initiative, prioritizing the establishment of a corporate minimum tax. However, she faced criticism from congressional Republicans, who contended that the policy would disadvantage US competitiveness in the global market.
In June, the Trump administration revisited the agreement, with congressional Republicans successfully pushing back against a provision that would have allowed the federal government to impose taxes on firms with foreign ownership and foreign investors affected by what they deemed “unfair taxes” in other countries.
Tax transparency organizations have decried the modified OECD plan, warning that it jeopardizes nearly ten years of global progress on corporate taxation. Zorka Milin, policy director at the Fact Coalition, a nonprofit focused on tax transparency, remarked, “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.” Critics emphasize that the intention of the minimum tax is to halt the detrimental race to the bottom in corporate taxation, which has led many corporations to record profits in regions with low tax obligations.
