Under U.S. Pressure, OECD Agrees to Deal Allowing Continued Tax Abuse by Big U.S. Corporations

Rather Than Rewarding Corporate Use of Tax Havens, Congress Should Fix Our Broken Tax Code

WASHINGTON, DC – Today’s announcement by the Organization for Economic Cooperation and Development (OECD) that U.S.-headquartered corporations will continue to be exempt from key elements of the OECD-negotiated global minimum tax regime represents a regrettable setback for the global fight against corporate tax avoidance. Among other changes, it allows large U.S. corporations to continue to benefit from the use of tax havens beyond what is permitted under the existing global minimum tax standard.

“This deal risks nearly a decade of global progress on corporate taxation only to allow the largest, most profitable American companies to keep parking profits in tax havens,” said FACT policy director Zorka Milin. “The Trump administration has chosen to prioritize maintaining rock-bottom taxes for big corporations to the detriment of ordinary Americans and our allies across the globe.”

The global corporate minimum tax, also known as Pillar Two, is the result of years of negotiation and compromise by members of the OECD’s Inclusive Framework, and has been implemented by a substantial portion of the world’s largest economies. The aim of Pillar Two is to end the decades-long global “race to the bottom” on corporate taxes that shrank public revenues and encouraged the proliferation of tax havens.

Despite the integral U.S. role in instigating and negotiating the framework in 2020 and 2021, the Trump administration has pushed hard for the tax not to apply to U.S. firms, arguing that the U.S. already taxes the foreign profits of its multinationals “robustly”. In reality, American corporations continue to book significant profits in tax havens – around one-half of their total foreign profits, according to new research by the EU Tax Observatory. This is no surprise: our tax code rewards American multinationals for shipping profits and jobs overseas. The recent tax law signed by the President in July kept most of these incentives in place, and showered nearly a trillion dollars in new and expanded tax breaks on the nation’s largest companies.

“Large U.S. multinational corporations have always been among the most competitive, innovative, and successful in the world. What they have not always done, however, is pay their fair share of taxes,” said Milin. “While the U.S. government has pushed hard for this deal as a win for ‘tax sovereignty,’ it actually does nothing for the U.S. public revenues. The best way to protect American companies from ‘extraterritorial taxation’ is not to demand special treatment, but to ensure that these companies pay their fair share at home.”

###

Notes to the Editor:

The full package of guidance announced today is here.
A “safe harbor” shielding American companies from taxation under certain elements of the Pillar Two framework was set to expire at the end of 2025. Today’s announcement modifies and extends the safe harbor, effectively exempting American companies from the global minimum tax.
In a recent Bloomberg Tax op-ed, FACT’s Zorka Milin has warned against moves to undermine the U.S. corporate minimum tax, which, like Pillar Two, was designed to ensure at least a 15 percent minimum rate on all “book income”.