The Group of 7 nations will say in a joint statement on Friday that the group has agreed to exclude American companies from penalties related to enforcement of a global minimum tax and move forward with “side-by-side” tax systems, according to a draft reviewed by The New York Times.
The agreement follows months of negotiations between the Trump administration and its counterparts about taxes that the U.S. finds to be discriminatory. The agreement should ease concerns among multinational corporations about the potential for a global tax war. To ease the deal, the Trump administration agreed this week to drop its support of a so-called “revenge tax” that Congress was considering in response to international efforts to raise taxes on American businesses.
“Delivery of a side-by-side system will facilitate further progress to stabilize the international tax system, including a constructive dialogue on the taxation of the digital economy and on preserving the tax sovereignty of all countries,” the G7 said in the draft statement.
The statement is expected to be released later on Friday. The Treasury Department did not immediately respond to a request for comment.
The announcement came a day after Treasury Secretary Scott Bessent announced on social media that the Trump administration was directing Republicans in Congress to drop the revenge tax proposal.
The measure, which faced strong opposition from corporate lobbyists, could have increased tax rates on foreign companies by as much as 20 percentage points over time if their headquarters were in “discriminatory foreign countries” with “unfair foreign taxes.” Business groups warned that the tax, which was estimated to cost companies more than $50 billion over a decade, would have scared off foreign investment and led to job cuts.
The Trump administration had publicly supported the tax earlier this month, but determined that an agreement would make it unnecessary. The understanding among the G7, which includes the world’s most advanced economies, will still need to be expanded to the Group of 20 and dozens of other nations that were part of the 2021 global minimum tax agreement that was brokered by the Biden administration.
President Trump and Republicans in Congress have opposed that deal over concerns that it was ceding control of the U.S. tax base.
Other nations are still moving ahead with the minimum tax plan, which called for them to enact corporate tax rates of at least 15 percent to prevent companies from shifting their profits around to find lower tax jurisdictions. Proponents of the agreement contended that this was necessary to prevent a “race to the bottom” of corporate taxation that was starving governments of revenue.
But the enactment of the revenge tax could have triggered a new round of tax wars that would have disrupted international commerce.
“There is a shared understanding that a side-by-side system could preserve important gains made by jurisdictions in the Inclusive Framework in tackling base erosion and profit shifting and provide greater stability and certainty in the international tax system moving forward,” the G7 statement said.
The tax provision, technically known as Section 899, that the Trump administration scrapped this week had generated significant blowback from both the business community and Wall Street over worries that it would discourage foreign direct investment at the same time that it would prompt overseas investors to rethink increasing their exposure to U.S. financial assets.
“The concern with 899 was the potential that it was cutting off your nose to spite your face,” said Ed Mills, a policy analyst at Raymond James.
One of the top issues was how it might affect demand for the county’s government debt, the supply of which is set to swell to cover the surge in spending expected in the current package of tax cuts Republicans are trying to pass. That would risk a rise in Treasury yields, the opposite of what the administration has been trying to achieve.
“Treasury Secretary Bessent has been singularly focused on driving down yields on long dated Treasuries, and if you added a provision that could dry up some of the demand for Treasuries, his efforts on yields generally could have just been completely destroyed,” Mr. Mills said.
Mr. Mills instead pointed to tariffs as one potential cudgel that the administration could wield to keep countries in compliance.
The G7 agreement makes no mention of the so-called digital services taxes that many nations are enacting that would apply to the international profits of American technology companies. However, the Trump administration could also use tariffs as a tool for responding to those taxes.
Alan Rappeport is an economic policy reporter for The Times, based in Washington. He covers the Treasury Department and writes about taxes, trade and fiscal matters.
Colby Smith covers the Federal Reserve and the U.S. economy for The Times.
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