G7 countries have agreed to exempt the United States from applying a 15 percent minimum corporate tax rate, the Canadian G7 presidency said in a statement Saturday night.
The other members of the group of Western industrialized countries caved in to shield their own firms from Washington’s threat of retaliation. The agreement was reported by POLITICO on Friday.
“It is an honorable compromise as it spares us from the automatic retaliations of Section 899 of the big beautiful bill,” Italian Finance Minister Giancarlo Giorgetti told local media.
The agreement comes as the EU and the U.S. are locked in high-stakes trade talks ahead of a July 9 deadline, when U.S. President Donald Trump has threatened to jack up tariffs on European goods to as high as 50 percent if no deal is reached.
In a sign of détente, the EU, Canada, Japan and the U.K. agreed to exempt the U.S. from applying the 15 percent minimum tax on multinationals in a bid to avert Washington’s countermeasures.
The minimum tax was a key plank of a deal, brokered by the Organization for Economic Cooperation and Development, that was agreed by almost 140 countries in 2021 to create a more fair global tax system. The U.S. Congress has never ratified that agreement.
In exchange for the exemption, the U.S. agreed to drop a so-called revenge tax against other countries that impose allegedly “discriminatory” levies on U.S. firms. U.S. policymakers came under intense pressure to ease the mooted tax amid fears that it would have dented foreign investment in the country.
“I have asked the Senate and House to remove the Section 899 protective measure from consideration in the One, Big, Beautiful Bill,” Treasury Secretary Scott Bessent wrote on X Thursday.
The Trump administration had taken aim against a rule in the OECD agreement ― the so-called undertaxed profits rule ― that compels countries undershooting the 15 percent tax limit to redistribute the uncollected revenues to foreign countries.
Trump has criticized this provision ― which is meant to level the playing field and avoid tax competition ― on the grounds that it would limit sovereignty and hand U.S. tax revenues to other countries.
“The Trump administration remains vigilant against all discriminatory and extraterritorial foreign taxes applied against Americans,” Bessent wrote on Thursday.
Exempting the U.S. from a key plank of the deal, however, represents a major concession for EU countries ― such as France ― that had been major backers of the tax deal.
A French official preferred to see the glass half full, stressing that the U.S. revenge tax “would have been a huge burden for French companies.”
“We are not claiming victory but we obtained some concessions as the U.S. pledged to engage in OECD negotiations on fair taxation,” the official said, speaking on condition of anonymity as is the custom in France.
The EU’s tax commissioner Wopke Hoekstra wrote on X that it is “great to see the signs of progress in G7 on international taxation,” without going into further details.
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