In a significant move during high-stakes trade discussions, G7 nations have reached an agreement to exempt the United States from a planned 15 percent minimum corporate tax rate. This decision was announced by the Canadian G7 presidency in a statement released on Saturday night.
The compromise arose as other G7 members opted to protect their own firms from potential retaliatory measures from Washington. Italian Finance Minister Giancarlo Giorgetti described the agreement as an “honorable compromise,” which would spare nations from the consequences of Section 899 of the U.S. legislation known as the ‘big beautiful bill.’
Details from the G7 indicate the establishment of a “side-by-side system,” which will exclude U.S. firms from these minimum tax rules and allow for more stability in the international tax landscape. The agreement unfolds against the backdrop of ongoing trade negotiations between the EU and the U.S., intensifying as they approach a deadline on July 9.
President Donald Trump has threatened to impose tariffs as high as 50 percent on European goods if an agreement is not reached, further motivating cooperation.
In a collaborative gesture, the EU, Canada, Japan, and the U.K. jointly agreed to this exemption for U.S. entities to avoid triggering potential countermeasures that the U.S. might deploy. The minimum tax had originally been a core element of the OECD-brokered deal, designed to create a more equitable global tax framework established by nearly 140 countries in 2021. However, the U.S. Congress has not ratified the agreement as of yet.
In return for the exemption from the minimum tax, the U.S. has consented to withdraw a proposed revenge tax set to target nations implementing allegedly discriminatory taxes on American firms. U.S. officials faced substantial pressure to retract this tax in light of concerns it could inhibit foreign investment within the U.S.
Treasury Secretary Scott Bessent communicated this request to Congress, highlighting the importance of eliminating Section 899 from consideration within the broader legislative package. The G7’s statement reflects mutual understanding, emphasizing that the withdrawal of Section 899 is vital for maintaining the broader agreement.
The Trump administration has been particularly critical of aspects of the OECD agreement, specifically targeting the undertaxed profits rule. This rule mandates that countries with corporate taxes below the 15 percent threshold redistribute uncollected tax revenues to other jurisdictions. Trump’s administration argued that this provision could undermine national sovereignty, resulting in U.S. tax revenues being redirected overseas.
“Vigilance against all discriminatory and extraterritorial foreign taxes on Americans is our goal,” wrote Bessent previously, reaffirming the administration’s position to protect U.S. interests.
The exemption for the U.S. from this crucial component, however, marks a considerable concession for EU member states, particularly for countries like France that have advocated for taxation reform. A French official expressed relief that the U.S. revenge tax, which could have imposed significant burdens on French corporations, will no longer be considered.
While the official declined to claim victory, they noted the U.S. commitment to engage in OECD negotiations focused on achieving fair taxation.
Critics of the agreement labeled it a capitulation to President Trump’s demands. Markus Meinzer from the Tax Justice Network NGO asserted that the arrangement would render the tax deal ineffective, likening it to a ship with a gaping hole that would no longer float.
EU Tax Commissioner Wopke Hoekstra acknowledged the significance of the progress made at the G7 meeting regarding international taxation, although details surrounding the next steps remain to be clarified.
image source from：politico
