Trump withdraws US from global tax deal, reignites clash over big tech and billionaire levies

Efforts to establish a coordinated global tax regime for tech giants and ultra-wealthy individuals are unraveling, as US President Donald Trump pulls back support and threatens new tariffs. The move has reopened transatlantic tensions and cast uncertainty over years of negotiations aimed at curbing tax avoidance and closing loopholes exploited by multinationals.

Tech tax standoff
On February 21, Trump issued a formal memo warning that his administration would retaliate against any country imposing taxes or fines on US tech firms that are “discriminatory, disproportionate,” or intended to shift revenue to local companies. He specifically threatened tariffs and other trade measures to protect American firms.

This echoes a dispute from his first term, when Trump threatened to impose tariffs on French wine and cheese after France implemented a digital services tax in 2019 targeting US firms. Since then, at least seven more countries have adopted similar taxes, including Italy, Spain, Austria, and India.

France collected €780 million from the tax in 2023. The European Union is now considering a bloc-wide digital tax if negotiations with the US fail, especially in light of Trump’s proposal to impose 20 percent tariffs on EU goods.

Britain, which currently raises about £800 million annually from its digital levy, appears open to revising the policy. UK Trade Secretary Jonathan Reynolds recently said the tax is not "set in stone" and could be subject to negotiation as London seeks a trade agreement with Washington.

Global corporate tax deal stalls
In 2021, nearly 140 countries reached an agreement under the OECD to reform international corporate taxation. The plan has two pillars. The first aims to tax profits where they are generated, especially targeting digital firms. The second sets a global minimum corporate tax rate of 15 percent.

So far, around 60 countries have adopted the minimum tax, including Brazil, Japan, Canada, Switzerland, and all EU members. However, the first pillar, seen as the core of the effort to prevent profit shifting and base erosion, has made no significant progress. Daniel Bunn of the US-based Tax Foundation said the talks on implementation have been stalled even under President Joe Biden.

Franco-American economist Gabriel Zucman warned that without enforcement, the agreement could collapse. “If the EU and other countries give up and allow American multinationals to exempt themselves, it will unfortunately spell the end of this very important agreement,” he told AFP.

Push to tax the billionaire class hits roadblock
A separate push to impose a wealth tax on billionaires is also losing momentum. Brazil, during its presidency of the G20, proposed a two percent minimum annual tax on individuals with more than $1 billion in assets. The policy, if implemented globally, was expected to generate $250 billion per year.

The United States has not backed the proposal. Biden stayed silent on it, and Trump—himself a billionaire—has championed tax cuts throughout his political career. With Trump in the White House again, observers see little chance of US support.

The US is home to nearly one-third of the world’s billionaires—more than China, India, and Germany combined, according to Forbes.

At a recent tax conference in Paris, economist Thomas Piketty said countries should act independently if multilateral coordination fails. “We need individual countries to act as soon as they can,” he said. “History suggests that once you have a couple of countries adopt a reform, it becomes a new standard.”