What does Trump’s exit from the global minimum corporate tax agreement mean?

Under President Trump, the United States is withdrawing from the OECD agreement, in which more than 130 countries committed to a minimum corporate tax rate of 15%. The goal of this agreement is to prevent countries from competing to attract multinationals by continuously lowering their tax rates. Does Trump’s decision spell the end of the deal? We discuss this with Martijn Bottenberg (Senior Counsel Tax at APG) and Johan Barnard (Head of International Public Affairs at APG).

What concrete agreements are currently in place?
Bottenberg: "Based on the OECD agreement, the European Commission has issued its own directive, requiring EU member states to implement a minimum corporate tax rate of 15%. This prevents multinationals from setting up artificial corporate structures that, while legal, are considered undesirable. Ideally, companies should pay taxes in the countries where they generate their revenue, regardless of where their headquarters are located. After all, multinationals benefit from a country’s infrastructure, so it seems only fair that they contribute to maintaining it. The 15% rate is a compromise. For comparison, the corporate tax rate in the Netherlands is 25.8%, and in the past, it has been as high as 35%.

There is still no consensus on Pillar 1 of the OECD agreement, which aims to determine how taxing rights are distributed among countries, and this is unlikely to change under Trump’s presidency."

What impact does Trump’s decision have on the coalition of countries aiming to curb tax competition?
Barnard: "It is unlikely that other Western countries will follow Trump’s lead; instead, they will likely try to wait out his presidency. The vast coalition of nations that support a minimum corporate tax is not expected to collapse easily.

In practical terms, Trump’s decision will probably not have a significant impact. The European Commission has made various attempts—some more successful than others—to compel American tech companies to pay more taxes in the EU. Trump may try to intervene in such matters, but it is far from certain that he has the power to influence a strong counterpart like the EU. Smaller countries outside of major economic blocs could face more difficulties.

Moreover, the U.S. already has a relatively high corporate tax rate of 35%. The real issue of excessively low tax rates lies primarily in tax havens and countries with special tax regimes designed to attract investment."

Is Trump right in claiming that the agreement would undermine U.S. sovereignty and competitiveness?
Bottenberg: "To some extent, Trump has a point. He fears that the OECD agreement will reduce the profitability of American companies. If a U.S. corporation routes its profits through a tax haven, little to no corporate tax is levied. However, under the OECD agreement, the tax haven’s government would be required to impose a 15% tax. If they fail to do so, the U.S. tax authorities would have to step in.

The agreement also affects U.S. sovereignty. Suppose an American company earns $100 million in profit. Currently, the U.S. can levy a 35% tax on that amount. However, if the multinational has already paid 15% tax in another country, Washington can only apply the 35% rate to the remaining $85 million. This results in lower tax revenues for the U.S. Meanwhile, European countries are more likely to benefit from the agreement, as it helps curb tax competition between nations.

It is worth noting that while the nominal corporate tax rate in the U.S. is relatively high at 35%, numerous exemptions and deductions bring the effective tax burden down. At the same time, the U.S. government has been unable to reform its own tax system in a way that would make initiatives like the OECD agreement unnecessary. In that sense, Trump is not entirely blameless. However, European countries like France have also struggled to reform their tax systems."

Trump is not the first president to prioritize American interests. What else can we expect in this regard?
Barnard: "Trump’s decision aligns with the longstanding views of the Heritage Foundation, a conservative American think tank. The foundation recently published Project 2025, a document filled with far-right policy proposals that Trump frequently draws from. The Heritage Foundation advocates for low taxes and views the OECD as a cartel of countries imposing unfairly high taxes, particularly on American multinationals. From their perspective, this needs to be stopped.

During President Clinton’s administration, the U.S. actually supported OECD initiatives to eliminate tax secrecy and crack down on tax havens. His successor, George W. Bush, initially put those efforts on hold, only to revive them after 9/11 when combating terrorist financing became a priority. President Biden supported the OECD agreement, but now the political pendulum has swung back in the opposite direction. Only time will tell how long this shift will last."

Bottenberg: "Markets value predictability, and the same applies to tax regimes. The Dutch tax authorities require taxpayers to maintain a so-called ‘consistent approach.’ In other words, companies cannot create tax structures solely for one-off financial gain. President Biden demonstrated such a consistent approach, whereas Trump did not. It remains to be seen what will happen next, especially regarding international agreements. The situation may not turn out to be as extreme as it currently appears, but one thing is certain: in Washington, many sacred cows are about to be challenged."