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The US Treasury division has requested Congress to scrap a provision in Donald Trump’s flagship price range invoice that may enable Washington to boost taxes on overseas investments, reversing a plan that Wall Avenue warned may roil markets.
Treasury secretary Scott Bessent stated on Thursday that the measure was now not wanted as a result of he had secured concessions for US firms to the brand new OECD international minimal tax regime.
Bessent stated on X that his company had requested lawmakers to take away the so-called Part 899 provision in Trump’s “huge, lovely” budget invoice. The laws has already handed the Home of Representatives and is into account within the Senate, with a vote probably coming as quickly as this weekend.
Part 899 would enable the US authorities to impose retaliatory taxes on firms and buyers from international locations that it deemed to have punitive tax insurance policies — resembling these allowed beneath the OECD regime.
Some banks and buyers had argued Part 899 may trigger a drop in overseas funding in US firms and markets.
UK chancellor Rachel Reeves described the Treasury secretary’s determination to name on Congress to strike Part 899 as “essential”, saying the progress supplied “certainty for enterprise”.
Bessent stated the US had reached an “understanding” with different members of the G7 group of main nations, which dominate the OECD, which might make Part 899 pointless.
A deal on the minimal tax regime would forestall the lack of greater than $100bn in American taxpayer {dollars}, in line with Treasury estimates, Bessent stated.
“OECD Pillar 2 taxes won’t apply to US firms, and we’ll work cooperatively to implement this settlement throughout the OECD-G20 Inclusive Framework in coming weeks and months,” he wrote.
Pillar 2 of the brand new OECD regime introduces a world minimal 15 per cent company tax price with measures permitting different international locations to gather the levies if firms’ house international locations don’t. The regime began to take impact this 12 months.
The worldwide minimal tax was designed as one half of a groundbreaking deal agreed by greater than 135 international locations on the OECD in 2021 to stop tax avoidance by multinationals and replace the worldwide tax system for a digital age.
The primary “pillar” of the deal, which aimed to shut tax loopholes for Massive Tech teams and multinationals, has not been enacted. The second pillar, the worldwide minimal tax, was carried out by a number of international locations in 2024.
The OECD deal had been supported by the US Treasury beneath the Biden administration however had not been handed by Congress, due partly to resistance from Republicans. When the Trump administration got here to energy it took a hostile stance to the settlement.
Republicans have been significantly sad about a part of the OECD deal referred to as the undertaxed income rule, which might enable different international locations to levy top-up taxes on US firms.
The rule, which they’ve branded as “discriminatory”, would allow governments to extend taxes on an area subsidiary of a multinational group if the multinational paid lower than 15 per cent in company tax in another jurisdiction.
Extra reporting by Paola Tamma in Brussels
