The Organization for Economic Co-operation and Development (OECD) Global Tax Deal (Global Tax Deal)
This presidential memorandum rescinds the U.S.'s commitment to the OECD Global Tax Deal, asserting that it infringes on U.S. sovereignty and negatively impacts American businesses.
It directs the Treasury Secretary and other officials to inform the OECD of this decision and to investigate foreign tax policies that disproportionately affect U.S. companies, developing protective measures in response.
The memorandum emphasizes the importance of upholding U.S. economic interests and competitiveness.
Arguments For
- Intended benefits: Reclaiming U.S. sovereignty over tax policy, protecting American businesses from discriminatory foreign tax practices, and enhancing economic competitiveness.
- Evidence cited: The memorandum argues that the Global Tax Deal allows extraterritorial jurisdiction over American income and limits the U.S.'s ability to enact beneficial tax policies. It also suggests the potential for retaliatory international tax regimes if the U.S. complies with the agreement.
- Implementation methods: The memorandum directs the Treasury Secretary and other officials to notify the OECD of the U.S.'s withdrawal from the agreement and to develop options for protective measures against discriminatory foreign tax practices.
- Legal/historical basis: The memorandum asserts the President's authority to direct executive branch policy and actions.
Arguments Against
- Potential impacts: Could damage international relations, potentially lead to trade disputes or retaliatory actions from other countries, and create uncertainty for multinational corporations operating in the U.S. and abroad.
- Implementation challenges: The effectiveness of the actions depends on the cooperation of other countries and the ability of the U.S. to effectively counter retaliatory measures.
- Alternative approaches: Negotiating amendments to the Global Tax Deal to address U.S. concerns, engaging in bilateral tax agreements with individual countries.
- Unintended effects: Could negatively impact investment in the United States, lead to higher taxes for U.S. companies or individuals, and further complicate the international tax landscape.
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)
This section introduces the memorandum, outlining its recipient (the Secretary of the Treasury, the U.S. Trade Representative, and the U.S. Permanent Representative to the OECD) and its subject: the revocation of the U.S. commitment to the OECD 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.
This section provides the rationale for the memorandum.
It argues that the Global Tax Deal undermines U.S. sovereignty by granting extraterritorial jurisdiction to other nations and restricts the U.S.'s ability to create favorable tax policies for its businesses and workers.
It also notes the potential for retaliatory tax measures from other countries.
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.
This section directs the Secretary of the Treasury and the U.S. Permanent Representative to the OECD to formally notify the organization that the U.S. is withdrawing from the Global Tax Deal.
It specifies that Congressional action is required for the deal to have any force within the United States.
Additionally, it mandates the Treasury Secretary and the Trade Representative to take further steps to implement the memorandum's directives.
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.
This section instructs the Treasury Secretary, in consultation with the Trade Representative, to investigate whether any foreign countries engage in discriminatory or extraterritorial tax practices impacting American companies.
They are then required to submit a report to the President outlining options for responding to such practices, completing this 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.
This section includes general provisions clarifying that the memorandum does not limit existing executive branch authorities, is subject to legal constraints and available funds, and does not create any new legal rights or benefits.