The Group of Seven (G7) nations have made a significant policy decision to exempt U.S. multinational companies from the global minimum tax framework. This exemption will allow American corporations to be exclusively taxed by the United States, impacting the global tax landscape negotiated under the OECD framework.
Why in News?
On June 28, 2025, the G7 nations, led by Canada, announced the exemption of U.S. multinational firms from the 15% global minimum tax. This move aligns with U.S. President Donald Trump’s initiatives to reshape international taxation laws, deviating from the OECD-led global tax consensus.
Background and Context
- In 2021, approximately 140 countries agreed on a two-pillar global tax deal under the OECD.
- Pillar One aimed to reallocate taxing rights on large multinationals.
- Pillar Two proposed a 15% global minimum corporate tax to prevent tax base erosion.
- The U.S., particularly under Trump’s leadership, had concerns regarding sovereignty and business competitiveness under this agreement.
What the G7 Agreement Includes
The G7 agreement entails:
- Exclusively taxing U.S. companies in the United States, implementing a “side-by-side” model.
This arrangement offers:
- Tax stability and simplified compliance.
- Increased foreign investment attractiveness for U.S. businesses.
- Protection against double taxation.
Key Points
- The exemption for U.S. firms still requires OECD approval.
- Trump’s policy reforms, including the “One, Big, Beautiful Bill,” involve significant international tax changes.
Section 899 Controversy
- The Section 899 provision allows taxing foreign investors/owners if their home countries impose unfair taxes.
- Termed a “revenge tax,” it has raised concerns about retaliatory trade barriers.
Global Implications
- The agreement may disrupt global tax cooperation efforts.
- It could prompt other countries to seek similar exemptions or implement independent tax policies.
- This decision risks creating a dual-track global tax system that impacts fair competition.
Static Facts
- G7 Members: Canada, France, Germany, Italy, Japan, the U.K., and the U.S.
- OECD: Organisation for Economic Co-operation and Development – a consortium of 38 nations focusing on global standards and policies.
Key Takeaways for Competitive Exams
- The G7 nations have agreed to exempt U.S. multinational companies from the global minimum tax, subject to OECD approval.
- This exemption aligns with Trump’s efforts to reshape international taxation laws and could impact global tax cooperation.
- The decision may lead to a shift in the global tax architecture, potentially affecting fair competition among businesses.
