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The Hill
3 days ago
- Business
- The Hill
Foreign investors recoil from ‘discriminatory' tax in Trump's big bill
A proposal in the House version of President Trump's tax and spending cut bill that could levy a 20 percent tax on foreign investors from countries that 'discriminate' against the U.S. has foreign governments and financiers worried. Tax experts say the rule is designed to modify a global minimum tax in a way that could make it compatible with the U.S. tax system, but foreign companies and diplomats are fretting that it could open another front in President Trump's trade war and boost the tide of economic nationalism that's now crashing over international commerce. 'If you're creating such a risk or potential uncertainty tax on businesses here, then many will think twice about investing further in the United States,' United Kingdom Ambassador to the U.S. Peter Mandelson told The Hill. 'If you've got an argument with [foreign] governments, then take it out on the governments. Don't take it out on the businesses and the individuals,' he said. The proposed rule, known as Section 899, targets a 15 percent global minimum tax regime that was being negotiated by the Biden administration. Republicans successfully blocked that deal from being implemented in the U.S. in its current form. While the plan specifically calls out the regime's undertaxed profits rule (UTPR) along with digital service taxes aimed at U.S. tech giants — both of which Republicans have long railed against —the language of the provision is sweeping. Unfair foreign taxes, as designated by the legislation, include 'extraterritorial' taxes, 'discriminatory' taxes, or 'any other tax [that] will be economically borne, directly or indirectly, disproportionately by United States persons.' 'Any country could be deemed to have imposed 'extraterritorial' and/or 'discriminatory' taxes affecting U.S.-headquartered multinationals,' Alex Cobham, head of the U.K.-based Tax Justice Network, wrote in an analysis. 'U.S. multinationals systematically underpay tax by shifting profits out of most jurisdictions where they operate. … Section 899 [seeks] to exert taxing rights on profits arising locally that would otherwise be shifted out.' For some investors, the proposed law evokes the White House's 'reciprocal' tariffs against dozens of countries that used a novel calculation and took the international trade world by storm. '[Section 899] raises the risk of adding a capital war to the current trade war. The impact could well be notable, mostly via its impact on [foreign direct investment],' Deutsche Bank strategist Tim Baker noted in a June 5 note to investors. Lawmakers are also thinking about Section 899 in terms of Trump's trade war. 'President Trump [is] talking about tariffs being fair in terms of reciprocity. That's all it is,' Sen. John Hoeven (R-N.D.) said Tuesday. 'What this tax does is make sure we get fair treatment.' International business groups are warning about the impact on foreign investment in the U.S., as well as the prospect of retaliation against the tax measure by foreign countries. In a letter to Senate leadership, the Global Business Alliance, which represents foreign companies in the U.S., said the rule risks 'prompting retaliatory action by foreign governments against U.S.-headquartered companies, further destabilizing an already fragile international tax environment.' Section 899 would add a 5 percent tax per year on the U.S.-based income of individuals and companies from the 'discriminatory' foreign countries that levy such taxes. The surtax would top out at 20 percent. The law appears designed to nullify the effects of the global minimum tax in its current form. The global minimum tax is also known as 'Pillar 2' and was negotiated through the Organization for Economic Cooperation and Development (OECD), a Western-led group of wealthy countries. The Joint Committee on Taxation, Congress's in-house tax scorer, estimated that the U.S. would lose about $120 billion under that deal, while Section 899 is estimated to raise a comparable $116 billion in revenues over 10 years. That's about 0.2 percent of annual U.S. revenues. Pillar 2's undertaxed profits rule allows U.S. subsidiaries of multinational corporations to be taxed if their parent company isn't taxed at the minimum rate of 15 percent. Digital service taxes allow foreign countries to tax companies like Facebook and Google, since their products are used abroad even though they're headquartered in the U.S. 'Several countries have already made the wise decision to exclude the UTPR surtax from their implementation of the OECD global minimum tax,' House Ways and Means Republicans warned in a January statement related to the proposal. Tax experts say Section 899 is primarily focused on getting rid of the UTPR within Pillar 2 and making sure that countries don't start taxing tech giants for using their products. 'We've heard Treasury officials now speak publicly multiple times. [Their position] has consistently been [that] this is not about getting rid of Pillar 2. This is about getting rid of a mechanism that is essentially forcing countries to adopt an income tax,' Pat Brown, co-leader of accounting firm PwC's tax practice, told The Hill. Brown said the broader language in the bill that's perturbing foreign investors is likely intended to be a safeguard against semantic workarounds for instituting digital service taxes and subsidiary top-up taxes — not to be a general-purpose punitive tool in an escalating trade war. 'I don't think there's something else specific on their radar. I think this is more [lawmakers' saying] 'We just need to make sure our bases are covered and somebody doesn't get cute,'' he said. Analysts for JPMorgan speculated that the practical scope of the provision would be much smaller than a 20 percent tax on foreign direct investment in the U.S., or even 'trivial.' 'More realistically, the effect of Section 899 should be much smaller, and perhaps trivial,' they wrote in a Tuesday note to investors. Notably, the big Republican bill does not axe the global minimum tax regime. However, there are questions about its prospects, given the inclusion of Section 899 in Republicans' big bill. 'If we look at Pillar 2 in a vacuum where the U.S. doesn't retaliate with tariffs and, say, Section 891 and proposed Section 899 … then I think Pillar 2 could definitely survive — although I think what I just said is unrealistic,' Scott Levine, former Treasury Department deputy assistant secretary for international tax affairs, said in April. 'We already know that we're not in a world without any of those measures.' Doing away entirely with the OECD regime would likely open up a floodgate of digital service taxes against U.S. tech giants that could drown countries in bilateral trade confrontations. European taxation and regulation of American Big Tech companies operating on their continent have been a sensitive spot for successive U.S. administrations. Vice President Vance voiced disapproval of European tech regulations, including the EU's wide-ranging Digital Service Act, at a conference on artificial intelligence in Paris earlier this year. 'Many of our most productive tech companies are forced to deal with the EU's Digital Services Act and the massive regulations it created about taking down content and policing so-called misinformation,' he said in February. Despite Republicans' overall maintenance of the OECD framework, some international tax groups have argued that Section 899 makes a rival framework advancing at the United Nations a more attractive option for international tax coordination. 'The negotiations of the U.N. tax convention are the best and perhaps only opportunity to act collectively against the unilateral threat posed by the Trump administration,' the Tax Justice Network's Cobham wrote. Sarakshi Rai contributed.
Economic Times
3 days ago
- Business
- Economic Times
How not to keep secrets: India's real estate, trusts and partnerships tell the story
Synopsis Tax Justice Network's Financial Secrecy Index ranks India 24th globally, highlighting both progress and persistent opacity. While India shows transparency in corporate ownership, weaknesses remain in areas like beneficial ownership and international cooperation. The index underscores the need for global fairness and transparency, urging countries to prioritize it for economic stability and trust. Tax Justice Network's latest Financial Secrecy Index (FSI), released on June 3, ranks India 24th globally, an eight-place jump from its last position. The country's overall secrecy score remains at 56 out of 100. ADVERTISEMENT The index ranks countries by how much they enable individuals to hide their finances from the law. A secrecy score reflects how permissive a country's laws are, while the 'Global Scale Weight' measures the financial services it offers to non- residents. Together, they form 'FSI Value' - a measure of a country's role in global financial secrecy. Key highlights of India's secrecy indicators (scores in brackets): Banking secrecy (34) indicates moderate transparency in banking practices. Beneficial ownership of trusts (100) suggests a lack of transparency, allowing trusts to potentially conceal the identities of true owners. Beneficial ownership of foundations and companies (0) reflects strong transparency measures requiring disclosure of beneficial owners. Free ports ownership (100) points to opacity in the ownership of assets stored in free ports. Real estate ownership (100) indicates a high level of secrecy in real estate ownership records. Transparency of partnerships with limited liability (100) reflects a lack of transparency in the ownership and financial reporting of such partnerships. Transparency of company ownership and accounts (100) suggests company ownership and financial statements are not transparent. Public country-by-country reporting (100) implies that MNCs are not required to report financial data on a country-by-country basis publicly. Legal entity identifier (50) indicates partial implementation of unique identifiers for legal entities to enhance transparency. Tax compliance focus (65) reflects moderate efforts in targeting tax compliance, especially among high-risk entities. Foreign investment income (70) suggests that foreign investment income may not be fully taxed or reported, leading to potential tax base erosion. Public statistics (10) indicate limited availability of public data on financial and economic activities. Anti-money laundering (16) suggests weaknesses in anti-money laundering frameworks. Automatic exchange of information (AEOI; 26) reflects limited participation in international agreements for the same. Exchange of information upon request (0) indicates non-participation or ineffective implementation of info exchange upon request. International legal cooperation (16) indicates limited engagement in international legal cooperation on financial matters. India has built a strong legal and administrative framework for information exchange, particularly excelling in bilateral Exchange of Information on Request (EOIR) and is an early adopter of AEOI. However, in the 2025 FSI, India scored a low 26/100 on AEOI, reflecting concerns around: Limited coverage of asset types (e.g., crypto, digital platforms). Delays in updating commitments to newer agreements like the Crypto-Asset Reporting Framework (CARF) and platform reporting rules (DPI MCAA). India scored well on transparency in corporate ownership and public financial reporting. However, this progress is undercut by opacity in other high-risk areas. India's limited participation in automatic information exchange and low compliance with international anti- money laundering and legal cooperation standards further highlight systemic weaknesses. ADVERTISEMENT The index underscores that financial secrecy is no longer a fringe issue. It is now driven by some of the world's largest and most influential economies. This should concern anyone who values global secrecy corrodes institutions, and it weakens the social contract. It makes citizens question why they should pay taxes when billionaires and MNCs do not. When governments can't collect taxes, they cannot fund essential services. When services fail, trust erodes. ADVERTISEMENT The index highlights a troubling trend: despite their pro-transparency stance, over half of EU countries are reportedly exploiting a loophole to block tax cooperation with many non-EU, often lower-income, nations. This loophole stems from OECD's tax convention, which allows countries to deny assistance or automatic data exchange with jurisdictions deemed 'non-reciprocal' or 'technically unprepared'.In practice, this means developing countries' tax authorities - those most in need of cooperation to combat illicit financial flows - are denied critical assistance. Meanwhile, wealth siphoned from their economies finds quiet refuge in EU financial institutions. This disparity undermines global efforts to tackle tax evasion, deepens global financial inequality and stifles economic development. ADVERTISEMENT This year's index offers not just a diagnosis but also hope. Countries like Spain, Denmark and Britain have shown that it is possible to improve transparency while remaining competitive in international finance. Their secrecy scores went down, their share of clean financial services went up - and their rankings fell (a positive outcome in this index). In other words, transparency isn't economic suicide. It's good the EU wants to be taken seriously, it must close its backdoor and begin treating transparency as a democratic obligation, not a geopolitical privilege. Taxation is not merely about revenue - it is about fairness. ADVERTISEMENT In a world where wealth moves globally but justice remains local, failing to act now could lead to a far steeper cost - not in euros or dollars, but in trust, stability and democratic legitimacy. The writer is former principal DG, income-tax (administration), New Delhi (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of (Catch all the Business News, Breaking News, Budget 2024 Events and Latest News Updates on The Economic Times.) Subscribe to The Economic Times Prime and read the ET ePaper online. NEXT STORY
Yahoo
14-05-2025
- Business
- Yahoo
Inside the European centres favoured for cross-border tax planning
Countries are estimated to be losing €416 billion ($492 billion) in tax revenue each year due to profit shifting by multinational corporations and offshore tax arrangements by wealthy individuals, according to the State of Tax Justice 2024 report by the Tax Justice Network. The UK, along with its Overseas Territories and Crown Dependencies, is cited in the report as the largest contributor to global tax revenue losses, accounting for 26% of the total. The report finds that Europe and its associated jurisdictions are collectively linked to over 70% of the risk of corporate tax base erosion globally. So, which European jurisdictions are most frequently used in international tax planning structures? Which countries play a prominent role in enabling such practices? And where do current rules make it easier for corporations to minimise their tax liabilities? The Corporate Tax Haven Index (CTHI) assesses jurisdictions based on how much they contribute to enabling multinational corporations to shift profits and reduce tax payments, using a system of scores and indicators developed by the Tax Justice Network. A jurisdiction's CTHI value reflects the extent of its involvement in facilitating global corporate tax base erosion, as calculated by the index. According to the 2024 report, countries are ranked by the scale and aggressiveness of their tax systems in offering corporate tax avoidance opportunities. The UK's network of Overseas Territories and Crown Dependencies features prominently. The British Virgin Islands, Cayman Islands, and Bermuda occupy the top three positions in the index, each scoring over 2,400 points. Among European jurisdictions, Switzerland holds the highest score outside the UK network (2,279), while the Netherlands (1,945) ranks highest within the European Union. Among Europe's top five economies, the UK (894) has the highest CTHI value, closely followed by France (883). Germany scores 590, with Spain at 557. Italy performs the best with a score of 342—since a lower score indicates better performance in limiting corporate tax avoidance. The CTHI Share is a critical metric that measures the proportion of global corporate tax avoidance risk attributed to each jurisdiction. According to the report, the UK and its network of Overseas Territories and Crown Dependencies are responsible for one-third of global corporate tax avoidance risks, while EU countries account for another third. Breaking it down further, just three British Overseas Territories account for 19.7% of global corporate tax avoidance risks: the British Virgin Islands (7.1%), the Cayman Islands (6.7%), and Bermuda (5.8%). The UK and its networks cost countries over €109 billion in lost tax In comparison, the UK itself accounts for just 2.1% — still the highest share among Europe's top five economies, followed closely by France, also at 2.1%. Germany and Spain have similar shares, at 1.4% and 1.3% respectively, while Italy is responsible for just 0.8%. Switzerland holds a 5.3% share. When other European countries and their associated jurisdictions are included, Europe's total share reaches 72%. The Haven Score is another key indicator used in the report. It measures the extent to which a jurisdiction's laws and regulations create opportunities for corporate tax avoidance, whether intentional or not. In 2024, the UK's network of Overseas Territories and Crown Dependencies dominated the rankings, with eight jurisdictions receiving the highest possible score of 100. The UK's score is 59. Aside from the UK network, Switzerland (89) has the highest Haven Score in Europe, while Ireland and Cyprus (both 79) lead within the EU. Portugal has the lowest score at 46. In 2021 alone, multinational corporations are estimated to have shifted €1.2 trillion worth of profits into jurisdictions with low or no tax rates, contributing to a €294 billion loss in direct tax revenue for governments globally. Global Scale Weight is another indicator that measures how much financial activity conducted by multinational corporations enters or exits a given jurisdiction. Europe and its overseas territories account for 61% of global financial activity, with the UK and its network holding the largest individual share at 16%. Among individual European countries, the Netherlands has the highest scale weight at 11.1%, followed by Luxembourg at 8.8%. The UK (8.3%), Germany (4.2%), Switzerland and Ireland (both at 3.4%), and France (3.1%) are also among the European countries with the highest scale weights. When a country offers special tax incentives or preferential tax arrangements to multinational corporations, these companies often end up paying significantly less than the statutory corporate income tax rate on their profits. This can result in much lower lower effective tax rates—known as the Lowest Available Corporate Income Tax Rate (LACIT). This measure is produced by the Tax Justice Network through analysis of potential legal disparities and tax planning strategies. According to the OECD, the statutory corporate income tax rate is zero in all eight of the UK's Overseas Territories and Crown Dependencies. However, there are significant discrepancies between statutory rates and the documented lowest available corporate income tax rates (LACIT) in several jurisdictions. The gap between statutory corporate tax rates and LACIT rates highlights the potential for tax planning strategies that can result in much lower effective rates. For example, in Luxembourg, the statutory rate is 24.9%, while the LACIT is just 0.3%. In Switzerland, the statutory rate is 19.7% vs. 2.6% LACIT, and in Ireland, the gap is 12.5% vs. almost zero. Belgium shows a difference of 25% vs. 3%, while Malta has the largest gap, with a statutory rate of 35% and a LACIT of just 5%. The Netherlands also demonstrates a sharp contrast, with a statutory rate of 25.8% vs. 5% for the LACIT. In its overseas territories, such as Aruba and Curaçao, statutory rates drop from over 20% to 0%. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Euronews
14-05-2025
- Business
- Euronews
Inside the European centres favoured for cross-border tax planning
Countries are estimated to be losing €416 billion ($492 billion) in tax revenue each year due to profit shifting by multinational corporations and offshore tax arrangements by wealthy individuals, according to the State of Tax Justice 2024 report by the Tax Justice Network. The UK, along with its Overseas Territories and Crown Dependencies, is cited in the report as the largest contributor to global tax revenue losses, accounting for 26% of the total. The report finds that Europe and its associated jurisdictions are collectively linked to over 70% of the risk of corporate tax base erosion globally. So, which European jurisdictions are most frequently used in international tax planning structures? Which countries play a prominent role in enabling such practices? And where do current rules make it easier for corporations to minimise their tax liabilities? The Corporate Tax Haven Index (CTHI) assesses jurisdictions based on how much they contribute to enabling multinational corporations to shift profits and reduce tax payments, using a system of scores and indicators developed by the Tax Justice Network. A jurisdiction's CTHI value reflects the extent of its involvement in facilitating global corporate tax base erosion, as calculated by the index. According to the 2024 report, countries are ranked by the scale and aggressiveness of their tax systems in offering corporate tax avoidance opportunities. The UK's network of Overseas Territories and Crown Dependencies features prominently. The British Virgin Islands, Cayman Islands, and Bermuda occupy the top three positions in the index, each scoring over 2,400 points. Among European jurisdictions, Switzerland holds the highest score outside the UK network (2,279), while the Netherlands (1,945) ranks highest within the European Union. Among Europe's top five economies, the UK (894) has the highest CTHI value, closely followed by France (883). Germany scores 590, with Spain at 557. Italy performs the best with a score of 342—since a lower score indicates better performance in limiting corporate tax avoidance. The CTHI Share is a critical metric that measures the proportion of global corporate tax avoidance risk attributed to each jurisdiction. According to the report, the UK and its network of Overseas Territories and Crown Dependencies are responsible for one-third of global corporate tax avoidance risks, while EU countries account for another third. Breaking it down further, just three British Overseas Territories account for 19.7% of global corporate tax avoidance risks: the British Virgin Islands (7.1%), the Cayman Islands (6.7%), and Bermuda (5.8%). In comparison, the UK itself accounts for just 2.1% — still the highest share among Europe's top five economies, followed closely by France, also at 2.1%. Germany and Spain have similar shares, at 1.4% and 1.3% respectively, while Italy is responsible for just 0.8%. Switzerland holds a 5.3% share. When other European countries and their associated jurisdictions are included, Europe's total share reaches 72%. The Haven Score is another key indicator used in the report. It measures the extent to which a jurisdiction's laws and regulations create opportunities for corporate tax avoidance, whether intentional or not. In 2024, the UK's network of Overseas Territories and Crown Dependencies dominated the rankings, with eight jurisdictions receiving the highest possible score of 100. The UK's score is 59. Aside from the UK network, Switzerland (89) has the highest Haven Score in Europe, while Ireland and Cyprus (both 79) lead within the EU. Portugal has the lowest score at 46. In 2021 alone, multinational corporations are estimated to have shifted €1.2 trillion worth of profits into jurisdictions with low or no tax rates, contributing to a €294 billion loss in direct tax revenue for governments globally. Global Scale Weight is another indicator that measures how much financial activity conducted by multinational corporations enters or exits a given jurisdiction. Europe and its overseas territories account for 61% of global financial activity, with the UK and its network holding the largest individual share at 16%. Among individual European countries, the Netherlands has the highest scale weight at 11.1%, followed by Luxembourg at 8.8%. The UK (8.3%), Germany (4.2%), Switzerland and Ireland (both at 3.4%), and France (3.1%) are also among the European countries with the highest scale weights. When a country offers special tax incentives or preferential tax arrangements to multinational corporations, these companies often end up paying significantly less than the statutory corporate income tax rate on their profits. This can result in much lower lower effective tax rates—known as the Lowest Available Corporate Income Tax Rate (LACIT). This measure is produced by the Tax Justice Network through analysis of potential legal disparities and tax planning strategies. According to the OECD, the statutory corporate income tax rate is zero in all eight of the UK's Overseas Territories and Crown Dependencies. However, there are significant discrepancies between statutory rates and the documented lowest available corporate income tax rates (LACIT) in several jurisdictions. The gap between statutory corporate tax rates and LACIT rates highlights the potential for tax planning strategies that can result in much lower effective rates. For example, in Luxembourg, the statutory rate is 24.9%, while the LACIT is just 0.3%. In Switzerland, the statutory rate is 19.7% vs. 2.6% LACIT, and in Ireland, the gap is 12.5% vs. almost zero. Belgium shows a difference of 25% vs. 3%, while Malta has the largest gap, with a statutory rate of 35% and a LACIT of just 5%. The Netherlands also demonstrates a sharp contrast, with a statutory rate of 25.8% vs. 5% for the LACIT. In its overseas territories, such as Aruba and Curaçao, statutory rates drop from over 20% to 0%. Nvidia's shares surged 5.6% on Tuesday, boosted by a tens-of-billions-of-dollars artificial intelligence (AI) investment plan agreed between the US and Saudi Arabia. However, the AI powerhouse's stock remains down 4.5% year-to-date as of market close on 13 May, facing challenges stemming from US-China trade tensions and the launch of China's DeepSeek, a lower-cost AI model. CEO Jensen Huang was among the US tech leaders—alongside Tesla's Elon Musk, OpenAI's Sam Altman, AMD's Lisa Su, Palantir's Alex Karp, and other executives—who accompanied President Trump on his visit to Saudi Arabia. At the investment conference, the White House announced a $600 billion investment pledge by the Middle Eastern kingdom into the US, including a nearly $142 billion defence sales deal, an $80 billion commitment into 'cutting-edge transformative technologies' in both countries, and other agreements across energy, aerospace, and sports sectors. Trump also vowed to lift all sanctions against Syria during his visit, a political gesture to warm the relationship with key Middle East countries. He is also going to meet leaders of Qatar and the United Arab Emirates (UAE) later this week. Nvidia announced it will partner with HUMAIN, a subsidiary of Saudi Arabia's Public Investment Fund focused on AI, to transform the Kingdom of Saudi Arabia (KSA) into 'a global powerhouse in AI, cloud and enterprise computing, digital twins and robotics.' Nvidia will supply its most advanced AI chips over the next five years, including 18,000 units of the GB200 Grace Blackwell AI supercomputer with its InfiniBand networking in the initial phase. The purchase forms part of a broader project for HUMAIN to build AI factories in the kingdom, with a projected capacity of up to 500 megawatts. The announcement also includes a deal with the Saudi Data & AI Authority (SDAIA), which will 'deploy up to 5,000 Blackwell GPUs for a sovereign AI factory and enable smart city solutions.' Aramco Digital, the technology arm of oil giant Saudi Aramco, will also collaborate with Nvidia to develop AI infrastructure in the country. Saudi Arabia, an oil-rich nation, is seeking to diversify its economy, which still relies heavily on crude exports. The kingdom aims to attract $100 billion in foreign direct investment annually, as outlined under its Vision 2030 strategy. According to a Bloomberg report, the Trump administration is also considering a deal with the UAE, which would permit the import of over one million advanced Nvidia chips—well above the export limits imposed under the Biden administration. Other major US tech firms, including AMD, Global AI, Amazon, Cisco, and OpenAI, also announced AI investment plans in Saudi Arabia during the event. Trump's Middle East trip is shaping up to be a major win for US AI chipmakers, as the president looks to ease export curbs to China. On the same day, the US Department of Commerce (DOC) announced that it is rescinding the AI diffusion rule imposed during former President Joe Biden's administration, which had been due to take effect on 15 May. Biden's administration had implemented fresh restrictions on AI chip exports to China in January, its final month in office, expanding controls to much of the world, amid concerns that China was accessing US AI chips via third countries. Both Saudi Arabia and the UAE had also been subject to those restrictions. 'The Trump administration will pursue a bold, inclusive strategy to advance American AI technology with trusted foreign partners, while keeping the technology out of the hands of our adversaries. At the same time, we reject the Biden administration's attempt to impose its own ill-conceived and counterproductive AI policies on the American people,' stated the DOC. The department added that the Bureau of Industry and Security (BIS) issued new guidance to strengthen controls over overseas exports of AI chips to limit China's access to advanced US technologies.
The Guardian
02-03-2025
- Business
- The Guardian
The Guardian view on a tax war: the world must unite against American obstruction
Donald Trump's Oval Office tirade on Friday laid bare his instinct to harangue and bully those – even supposed allies such as Ukraine, fighting for its survival – who dare to disagree. Countries pushing global tax reform at the UN will be watching as US demands for subjugation play out in plain sight. His day-one threat to punish nations taxing US firms is an all-out attack on global fiscal cooperation. If multilateralism in taxation was already on shaky ground, Mr Trump's return could bury it for good. Under discussion is a new UN tax convention that may permit states to tax economic activity where it actually occurs, rather than allowing multinationals to shift profits to tax havens. The Tax Justice Network (TJN) said last year that nations lose $492bn (£390bn) annually due to corporate tax abuse. The global south bears the greatest losses, which undermine public services like health and education. If enacted, the convention would create a legally binding framework requiring multinationals to pay tax where they employ staff and do real business – not where they stash profits. This would replace the outdated arm's-length principle with unitary taxation, ensuring fair profit allocation. It would mean an end to Amazon, Google and Apple putting billions through lower-tax jurisdictions while extracting wealth from higher-tax ones. Before Mr Trump's election, about half of global tax losses were facilitated by the eight nations opposed to a UN tax convention – Australia, Canada, Israel, Japan, New Zealand, South Korea, the UK and the US. Yet opposition takes two forms: constructive and destructive. When negotiations for the UN framework convention on international tax cooperation began last month, all participants committed to the convention's principles except Mr Trump's delegate, who walked out in defiance, calling on others to follow. The expected exodus never came. Washington was left isolated. Mr Trump's 'America first' became 'America alone'. But the US still has tremendous clout. As TJN's new report, The International Tax Consequences of President Trump, highlights, talks among 120-plus nations on taxing cross-border digital services – led by the US-dominated OECD – are grinding towards a showdown. Mr Trump's tariff threats against Canada and the EU are warning shots, aimed at countries daring to raise tax rates on multinationals, especially US ones. This fight isn't just about taxation; it's about sovereignty. Mr Trump's administration is trying to strong-arm nations into preserving a system that shields corporate profits from fair taxation. The difference now is that the world is pushing back. For decades, the US has had an unofficial veto over global tax rules, using its heft to shape – and then reject – OECD-led proposals. But this approach is no longer sustainable. The growing coalition behind the UN tax convention shows that many governments prefer to chart their own course. Mr Trump's return forces a stark choice: stick with a broken system that fuels tax abuse or push forward without the US. Any attempt to tax multinationals fairly will face American retaliation, but clinging to the OECD's US-dominated framework is a dead end. A united front at the UN is needed to forge a global tax system not dictated by Washington's whims. The cluster munitions convention succeeded without US involvement, proving international norms can shift without it. The world doesn't need US approval to fix global taxation. It needs the will to move forward together.
