Non-Binding Compromise on Global Minimum Tax is not “End of the Road” for Multilateral Tax Cooperation

WASHINGTON, DC – On June 26, Treasury Secretary Scott Bessent announced an understanding between the U.S. and other G7 countries that purports to exempt U.S. multinational corporations from certain taxes under the globally agreed minimum tax regime, also known as “Pillar Two”. The Secretary’s announcement, made on the social media platform X (formerly Twitter), was followed by an official G7 statement expanding on the principles of the understanding. 

“While regrettable, this non-binding compromise is not the end of the road for Pillar Two, but actually reaffirms a commitment to multilateral cooperation against corporate tax avoidance,” said FACT policy director Zorka Milin in a statement. “Any changes to national laws to accommodate the U.S. position must still be adopted by the legislatures of the nearly 150 countries that have committed to ending the global race to the bottom on corporate taxes.”

The G7 announcement was immediately followed by the removal of a controversial international retaliation tax provision – the proposed Section 899, commonly called the “revenge tax” – from the Senate’s major tax and spending package, which is expected to be voted on this week. Despite the removal of this provision and the inclusion of certain positive changes to the taxation of foreign profits, the current Senate draft still fails to fully address incentives in the U.S. tax code that encourage the offshoring of jobs and profits by American multinational companies, and that cost the Treasury tens of billions of dollars in revenue each year. 

“Before celebrating and claiming a win for tax sovereignty, America should do a better job of taxing its corporations and stop letting them use tax havens to avoid paying their fair share,” said Milin. “The current bill largely continues to reward big corporations for moving profits and jobs to tax havens. That’s hardly ‘America-first’ – it’s really ‘tax havens first.’” 

The international tax provisions of the Senate bill alone are estimated to increase deficits by $167 billion over the coming decade. In addition to continuing to reward multinational profit shifting, the bill maintains various harmful proposals that shift the overall federal tax burden from large, profitable companies to the nation’s most vulnerable populations, including a new proposal that would reduce the tax liability of oil and gas companies under the corporate alternative minimum tax regime. Last week, Senator Elizabeth Warren of Massachusetts led a letter to major oil companies requesting additional information on their lobbying activities toward securing this new tax carveout. 

“The Senate tax bill is showering billions of tax dollars on big, profitable corporations for no good reason, whether it’s through a windfall to Big Tech companies for past investments, or rewarding oil companies for drilling more than would otherwise be economical,” said Milin. “This is not fiscally responsible, and comes at the expense of constituents whose healthcare will be sacrificed to pay for these corporate tax breaks.”

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Notes to the Editor: 

• The official G7 statement on global minimum taxes can be read here.
• The latest text of the Senate tax and spending package can be found here. The Joint Committee on Taxation estimates that the tax provisions of the current Senate proposal would cost nearly $4.5 trillion over the next decade, before factoring in spending cuts from other committees.
• A recent op-ed by Senator Sheldon Whitehouse (D-RI) expands upon the ways in which the Senate reconciliation package rewards U.S. corporations for offshoring domestic jobs and profits. In proceedings Monday, Senator Whitehouse introduced an amendment to the Senate bill that would reverse numerous cuts to healthcare programs, paid for by repealing certain international tax provisions.
• Analysis by independent tax experts including the Joint Committee on Taxation and the Congressional Budget Office has consistently shown that the reconciliation bill is likely to disproportionately benefit the wealthiest individuals and largest corporations, while harming the bottom quintile of the income distribution.