Washington, DC – President Donald Trump’s recent move to pull back support for a coordinated global tax regime for tech giants and ultra-wealthy individuals has created a rift in efforts to combat tax avoidance and close loopholes exploited by multinationals. The President’s threat of new tariffs has reignited transatlantic tensions and cast doubt on years of negotiations aimed at creating a fair tax system.
Trump’s warning that the US would retaliate against any country imposing taxes or fines on American tech firms has set the stage for potential trade conflicts. The threat of tariffs and other trade measures to protect US companies echoes past disputes, such as the one with France over a digital services tax implementation in 2019.
Countries like France, Italy, Spain, Austria, and India have already implemented similar taxes, leading to a growing international tax standoff. The European Union is now considering a bloc-wide digital tax if negotiations with the US fail, especially in light of Trump’s proposal for additional tariffs on EU goods.
In addition to the tech tax dispute, global efforts to establish a corporate tax deal have also hit a roadblock. While nearly 140 countries agreed to reform international corporate taxation under the OECD in 2021, progress has been slow. The plan includes two pillars aimed at taxing profits where they are generated and setting a global minimum corporate tax rate of 15 percent.
However, despite some countries adopting the minimum tax, the implementation of the first pillar to prevent profit shifting and base erosion has stalled. Experts warn that without enforcement, the agreement could collapse, potentially allowing American multinationals to exempt themselves from the new tax regulations.
Furthermore, a push to impose a wealth tax on billionaires, spearheaded by Brazil, is losing momentum as the United States, home to a significant number of billionaires, has not backed the proposal. The lack of support from the US, coupled with Trump’s history of advocating for tax cuts, poses challenges to global efforts to impose a two percent minimum annual tax on individuals with assets exceeding $1 billion.
Economists like Thomas Piketty emphasize the importance of countries taking independent action if multilateral coordination fails. They suggest that the adoption of new tax reforms by a few countries could set a new standard and pave the way for fairer tax policies on a global scale.