OECD Global Minimum Tax still very alive despite Trump attempts to throttle

US president Donald Trump’s intention to pull the US out of the OECD’s Global Minimum Tax (GMT) deal is bad news. But it by no means spells the end of the OECD GMT.
In a presidential memo issued on Monday 20 January, Trump said he would recapture “our Nation’s sovereignty and economic competitiveness by clarifying that the Global Tax Deal has no force or effect in the United States”.
The OECD GMT ensures multinational companies with revenues above €750mn are subject to a 15% effective minimum tax rate of corporate income tax in large parts of the world. The OECD GMT (sometimes referred to as Pillar Two) was agreed by more than 135 OECD member jurisdictions in October 2021, including the EU, Japan, Canada, South Korea and the UK.
Last year the OECD estimated the GMT would halve global profit shifting – from US$698bn to US$356bn – and increase corporation tax revenues by US$155-192bn per year. These are vital sums when so many parts of the world are facing cost of living pressures.
Achieving these figures requires the OECD GMT to be adopted by a critical number of countries. And it has been – with currently 90% of the world’s largest multinationals in scope. The previous Biden administration was supportive of the OECD GMT, but the country’s congress never provided formal approval. Nevertheless, the vast majority of US multinationals are captured by legislation in other jurisdictions – much to the ire of president Trump’s camp, who are threatening retaliatory action.
US GMT will drift upwards regardless
Significantly, however, the US already operates a crude, blended global minimum tax of its own, which is charged at roughly a 10% global tax rate (referred to as the global intangible low-taxed income, or GILTI) as part of the Tax Cuts and Jobs Act that Trump introduced in 2017 in his first term.
However, temporary tax reductions embedded in the Act are set to expire in 2025, and there is a very plausible scenario in which the US lets this 10% global minimum tax rate quietly drift up to around 15% the following year. The OECD can then simply recognise this as an indefinite safe harbour and OECD GMT compliant, and keep the whole show very much on the road.
This drift is of course right given that corporation tax is a crucial source of revenues, uniquely progressive, has a major impact on a country’s tax morale and tax dodgers are a drag on national productivity. A global baseline similarly evens the playing field for businesses to compete fairly.
In fact, there is strong evidence to suggest that the global race to the bottom on corporate income tax that has been unfolding for decades had finally bottomed out. In 2023, far more jurisdictions implemented corporate income tax rate increases than decreases.
As the US enters into another Trump presidency and the pushback on fair taxation ramps up, other jurisdictions may be tempted to lower their headline rates of corporation tax. But it is worth remembering that low corporate tax rates do not boost growth or encourage investment (Trump only has to look at his last attempt at this for proof) and that as much as he’d like to put an end to it, the OECD’s GMT is still very much alive.