Tech Giants Breathe Easier as Trump Repeals Global Minimum Tax Threat
On Inauguration Day, President Donald Trump issued an executive order that provides relief to large technology corporations by suspending the implementation of a global minimum tax agreement.
Global Minimum Tax Deal: A Recap
In 2021, 140 countries agreed to a two-part tax plan:
* Pillar One: Multinational companies pay taxes in countries where their customers are located.
* Pillar Two: Sets a global minimum tax rate of 15% for multinationals with revenue exceeding €750 million.
Pillar Two aims to prevent corporations from shifting income to low-tax jurisdictions to avoid paying higher taxes.
Implications for Tech Companies
The US research and development (R&D) tax credit reduces the effective tax rate of many tech companies below the 15% global minimum. This means they could have been subject to additional taxes under the UTPR, which allows countries to levy taxes on companies that pay below the minimum rate.
Trump's Executive Order
Trump's order signals that the US will not enact the global minimum tax deal. It also warns of retaliation against countries that penalize US companies through extra taxes.
Relief for Tech Giants
Trump's order provides welcome news for tech giants such as Meta Platforms, Alphabet, and Amazon, which have benefited from the R&D tax credit. It removes the potential for additional tax burdens.
Unnecessity of the Order
Despite Trump's order, the Biden administration had expressed support for the global minimum tax. However, Congress had made no moves towards implementing it, and an allowance was being negotiated to exempt companies claiming the R&D credit.
Conclusion
Trump's executive order suspends the global minimum tax threat, providing relief to tech companies and other firms that utilize the R&D tax credit. While it may have been unnecessary, it serves as a reminder of the potential consequences for countries that infringe upon US interests.