POSITION | TAX POLICY | PILLAR TWO
Global Minimum Tax: Developments Threaten European Competitiveness Protect the European Economy
March 7, 2025 The current U.S. tax policy under President Donald Trump, in conjunction with the global minimum tax, poses significant risks to the global competitiveness of European companies. Politicymakers must urgently take measures to mitigate imminent burdens on European businesses and offset competitive disadvantages.
Significant Imminent Additional Burdens for European Companies U.S. President Trump has ruled out U.S. participation in the global minimum tax and is planning additional tax policy measures that will severely disadvantage European companies. These regulations could come into effect as early as this year. Particularly concerning are: ▪
Memorandum of January 20, 2025: Investigation into whether foreign countries are not complying with tax treaties or are extraterritorial or discriminating against American companies. Results and possible countermeasures are to be presented by April 1, 2025. Additionally, another memorandum refers to Section 891 of the U.S. Tax Code, which has existed for decades but has never been applied, allowing for the doubling of tax rates for companies from the aforementioned countries.
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Republican Proposal (H.R. 591, Section 899 IRC): This proposal eliminates reduced double taxation agreements withholding tax rates and introduces special tax rates of up to 20 percent on U.S. income of companies from countries with allegedly discriminatory tax practices. This affects permanent establishments, dividends, interest, and licenses. The Undertaxed Profits Rule (UTPR) and Digital Services Taxes (DST) are specifically mentioned as discriminatory tax regimes.
A primary target of U.S. criticism is the UTPR, a key component of the OECD's minimum tax framework. The UTPR aims to ensure that corporate profits of multinational companies from countries without minimum taxation mechanisms (e.g., U.S. corporations) are taxed at a minimum of 15 percent if a business entity of the corporate group is located in a country applying UTPR. Since the U.S. has not
Bundesverband der Deutschen Industrie e.V. | Abteilung Steuer- und Finanzpolitik | steuerpolitik@bdi.eu | www.bdi.eu