Ongoing battles over the global minimum taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. are stifling foreign direct investment and economic growth in developing nations.
When it comes to tax policy, the goal of multilateralism is to provide more equal treatment among countries in technical policy matters, recognizing that investment and economic growth need not be a zero-sum game.
But a recent deal between the US and other G7 countries to diffuse sovereignty disputes over Pillar Two leaves emerging economies with more questions than answers about their own tax policy sovereignty.
President Donald Trump made clear that the US wouldn’t accept the global minimum tax (known as Pillar Two) from the Organization for Economic Cooperation and Development in its current form. The extraterritorial nature of the undertaxed profits rule has caused confrontation between the US and allies—including the EU and Canada, which have already adopted this new tax system into their laws.
This is a preview of our full op-ed originally published in Bloomberg Tax.