Analysis of the Memorandum Regarding the OECD Global Tax Deal

Policy Content and Intent

The memorandum rejects the OECD Global Tax Deal, which aimed to establish a global minimum corporate tax rate and address tax avoidance by multinational corporations. The stated goals are to reaffirm U.S. sovereignty in tax policy, protect American businesses from retaliatory international tax regimes, and ensure American tax policies prioritize domestic economic competitiveness. Specific provisions include:

1. Directing the Treasury Secretary and U.S. Permanent Representative to the OECD to formally notify the organization that commitments under the prior administration are null and void without Congressional approval.
2. Mandating an investigation into foreign countries’ compliance with tax treaties and discriminatory tax practices, with recommendations for retaliatory measures to protect U.S. businesses.

Historical Context and Precedent

This memorandum reverses U.S. commitments made under the Biden administration’s support for the OECD tax deal, which sought to standardize global corporate tax rates and reduce tax base erosion. The Trump administration previously resisted such agreements, prioritizing unilateral tax policies under an “America First” framework. The rollback reflects a broader trend of rejecting multilateral agreements in favor of bilateral or domestic measures, reminiscent of Trump’s earlier withdrawal from international agreements such as the Paris Climate Accord.

Broader Policy Context and Connection to Project 2025

The rejection of the OECD deal aligns closely with the Project 2025 vision, emphasizing economic nationalism and the rollback of globalist policies deemed to undermine U.S. sovereignty. This memorandum furthers deregulation and prioritizes American businesses’ global competitiveness, resonating with Project 2025’s themes of reducing multilateral entanglements and reinforcing nationalist governance frameworks. Social justice advocates may view this move as disproportionately favoring large corporations while neglecting global economic equity and collaboration.

By rejecting the deal, the administration risks exacerbating global tax disparities and enabling profit-shifting by multinationals. The focus on sovereignty over cooperation demonstrates a marked departure from shared international responsibilities, which Project 2025 advocates perceive as constraints on American economic freedom.

Predicted Outcomes

Economic Impacts:

• Corporate Benefits: U.S. multinationals may benefit from lower domestic tax rates, enhancing short-term profitability.
• International Tax Disputes: Retaliatory taxes or digital service taxes targeting U.S. companies may escalate.
• Economic Inequity: Developing countries relying on global tax coordination may lose significant revenue, amplifying economic disparities.
  Probability: 95%

Public Backlash and Sentiment:

• Social justice advocates are likely to criticize the move for undermining global economic equity and enabling tax avoidance by large corporations.
  Probability: 90%

Federal-State Relations:

• Progressive states like California or New York may attempt to enforce their own tax regulations on multinational corporations, creating friction with federal policies.
  Probability: 70%

State and Public Reactions

Legal Challenges:
Progressive states, especially those with strong social justice policies, may consider lawsuits challenging the lack of adherence to international tax agreements as violations of broader constitutional commitments to fair trade.
Probability: 80%

Public Activism:
Labor unions, progressive economic groups, and global justice organizations may rally against the rollback, framing it as a corporate giveaway at the expense of fairness.
Probability: 85%

Interrelated Impacts

This memorandum may influence U.S. relations with allied nations, especially in the EU, which largely supported the OECD tax framework. It could also provoke retaliatory tariffs or tax measures, further straining international trade relations. Additionally, the emphasis on sovereignty mirrors other executive actions focused on rejecting multilateralism, amplifying nationalist trends in governance.

Legal and Constitutional Considerations

By declaring that prior commitments have no force or effect, the memorandum raises questions about the authority of executive agreements made without Congressional ratification. Potential challenges could arise regarding the U.S.’s standing in international law and its obligations to trade partners under existing treaties.
Probability of Legal Challenges: 85%

Global Implications

The withdrawal may undermine the credibility of U.S. commitments in other international agreements, signaling unpredictability in American foreign economic policy. It could also embolden other nations to retreat from cooperative frameworks, weakening global governance systems.

• “Trump Effectively Pulls U.S. Out of Global Corporate Tax Deal.” Reuters, January 21, 2025.
• “Donald Trump Threatens to Double Tax Rates for Foreign Nationals and Companies.” Financial Times, January 21, 2025.
• “Trump Threatens to Double Taxes for Foreign Nationals.” The Times, January 21, 2025.
• “Trump’s Withdrawal from OECD Global Tax Deal Will Not Affect India’s Tax Collection, Experts Say.” Good Returns, January 21, 2025.
• “Trump Withdraws U.S. from OECD Tax Pact, Demands Retaliation Review.” Capital Brief, January 21, 2025.

Text as it Appears on Whitehouse.gov as of 01-21-2025

MEMORANDUM FOR THE SECRETARY OF THE TREASURY

THE UNITED STATES TRADE REPRESENTATIVE

THE PERMANENT REPRESENTATIVE OF THE UNITED STATES TO THE ORGANIZATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

SUBJECT: The Organization for Economic Co-operation and Development (OECD) Global Tax Deal (Global Tax Deal)

The OECD Global Tax Deal supported under the prior administration 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. Because of the Global Tax Deal and other discriminatory foreign tax practices, American companies may face retaliatory international tax regimes if the United States does not comply with foreign tax policy objectives. This memorandum recaptures our Nation’s sovereignty and economic competitiveness by clarifying that the Global Tax Deal has no force or effect in the United States.

Section 1. Applicability of the Global Tax Deal. The Secretary of the Treasury and the Permanent Representative of the United States to the OECD shall notify the OECD that any commitments made by the prior administration on behalf of the United States with respect to the Global Tax Deal have no force or effect within the United States absent an act by the Congress adopting the relevant provisions of the Global Tax Deal. The Secretary of the Treasury and the United States Trade Representative shall take all additional necessary steps within their authority to otherwise implement the findings of this memorandum.

Sec. 2. Options for Protection from Discriminatory and Extraterritorial Tax Measures. The Secretary of the Treasury in consultation with the United States Trade Representative shall investigate whether any foreign countries are not in compliance with any tax treaty with the United States 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 United States should adopt or take in response to such non-compliance or tax rules. The Secretary of the Treasury shall deliver findings and recommendations to the President, through the Assistant to the President for Economic Policy, within 60 days.

Sec. 3. General Provisions. (a) Nothing in this memorandum shall be construed to impair or otherwise affect:

(i) the authority granted by law to an executive department, agency, or its head; or

(ii) the functions of the Director of OMB relating to budgetary, administrative, or legislative proposals.

(b) This memorandum shall be implemented consistent with applicable law and subject to the availability of appropriations.

(c) This memorandum is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.