Stay Ahead of the Latest Tax Developments
At IBFD, we keep you informed
Keeping up with the ever-evolving world of international tax is essential, and requires the latest insights. IBFD keeps you informed on key policies, case law, and legislation shaping the global tax landscape with up-to-the-minute coverage of the latest tax developments through our Tax News Service (TNS).
Here are five new developments you might be interested in.
President Trump Signs Executive Memorandum to Counteract Foreign Digital Taxes
24 February 2025
Report from our correspondent Kunwar Singh, Attorney, India
President Donald Trump has reignited his "America First" economic crusade, signing a new executive memorandum aimed at shielding US technology companies from what he calls "overseas extortion." The memorandum outlines the present administration's intent to scrutinize and counteract foreign tax and regulatory measures that disproportionately affect American companies, with Canada's Digital Services Tax (DST) remaining a central point of contention (see Note 1).
The memorandum directs the United States Trade Representative (USTR) to explore trade remedies under the United States-Mexico-Canada Agreement (USMCA) against Canada's DST (seeUnited States Requests Dispute Settlement Consultations on Canada's Digital Service Tax (5 September 2024)). Previously, a fact sheet released by the White House claimed that foreign DSTs cost American companies billions of dollars in unfair taxes and compliance costs (see United States Escalates Trade Tensions with Canada Over Digital Services Tax (14 February 2025)).
Additionally, Treasury officials are tasked under the memorandum with investigating whether foreign tax policies violate US tax treaties or warrant countermeasures under Section 891 of the Internal Revenue Code, which allows the United States to double the tax rates imposed on citizens and corporations from countries deemed to impose discriminatory taxation on US citizens or corporations. The final results of this investigation will be included as part of the report required under the previous presidential memorandum issued on 20 January 2025.
The memorandum further outlines the present administration's plan to scrutinize other laws that require American streaming platforms to fund local productions, network fees imposed on US-based content providers, and data localization rules that force American companies to store sensitive information within foreign jurisdictions.
The memorandum also establishes a formal reporting mechanism for American businesses to notify the USTR of foreign tax and regulatory practices that "disproportionately harm US companies." This measure positions the US government as a direct enforcer of corporate grievances in the global trade arena.
Apart from Canada, the memorandum also aims at digital services taxes imposed by France, Austria, Italy, Spain, Turkey, and the United Kingdom. The investigations by USTR were initially started by the Trump administration against these nations on 16 July 2019 and 5 June 2020, which were stalled later.
The White House released the executive memorandum on 21 February 2025.
Note: Canada's DST, first proposed in 2020 and formally adopted in 2024, imposes a 3% levy on the revenues of large multinational digital companies with global revenues exceeding EUR 750 million (seeCanada to Impose 3% Digital Services Tax Pending Action at OECD (21 April 2021)). The tax primarily targets digital advertising, online marketplaces, and the sale of user data.
United States Denounces OECD Global Tax Deal
21 January 2025
Report from IBFD News and Treaties Department
On 20 January 2025, the White House issued a memorandum on the OECD Global Tax Deal, which stipulates that the Global Tax Deal has no force or effect in the United States. The OECD Global Tax Deal was developed as part of the G20 Inclusive Framework on BEPS, which involves international cooperation to address global tax challenges.
Commitments made by the prior US administration are nullified, based on the absence of Congress approval for measures to bring the US into compliance with the Global Tax Deal. The memorandum emphasizes that the Deal limits the Nation's sovereignty and economic competitiveness by allowing extraterritorial jurisdiction over American income and restricting the ability to implement tax policies that benefit American businesses and workers.
The Secretary of the Treasury and the Permanent Representative of the United States to the OECD have been tasked to notify the OECD accordingly. This directive aims to formally communicate that any commitments made by the prior administration with respect to the Deal are void and unenforceable without Congressional approval.
Additionally, the Secretary of the Treasury and the US Trade Representative will examine if countries comply with US tax treaties or have measures in place, or are likely to adopt such measures, that are considered extraterritorial or disproportionately affecting American companies. They will then assess which protective measures or other actions the US can take in response. The memorandum specifies that these findings must be presented to the President through the Assistant to the President for Economic Policy within 60 days.
Furthermore, the memorandum clarifies that it does not create enforceable legal rights or obligations and must be implemented in compliance with existing legal frameworks and budgetary appropriations.
Further developments will be reported as they occur.
In-Depth: The US Exits UN Convention on International Tax Cooperation Alone
Report from our correspondent Sanya Shah
The United States Delegate Jonathan Shrier walked out of the UN Convention on International Tax Cooperation on the first day of the meeting in New York City, citing disagreement. According to the statement made by Shriers, the United States would no longer be participating in the negotiations, calling the process "inconsistent with U.S. priorities" and "an unwelcome overreach." Without providing detailed insight into the specificities of the US' rejection beyond broad strokes, the Delegate exited the Convention welcoming others to join in opposition; despite the call, no other member states followed suit.
This incident marks a novel shift in US tax policy where it will no longer hold sway in the negotiations leading up to the development of an international tax framework as outlined in the Terms of Reference. The US Administration had in previous years attempted to steer the negotiations, however with the exit of Delegate Shrier, in addition to the US Executive Memorandum issued on 20 January 2025 (The Organization for Economic Co-Operation and Development (OECD) Global Tax Deal), it is clear that the United States will no longer engage. In fact, per the current Administration, it has stated that it will seek to actively "reject" and "oppose" any outcomes of the process.
The US' opposition incorporates the proposed OECD Pillar Two minimum tax rules, which is expected to be adopted by more than 140 countries around the globe in the coming months. This includes the European Union which has, via a Directive, implemented certain principles of Pillar Two. Per the January 2025 Executive Memorandum, the United States has indicated that it intends to assess and take protective measures or other actions in response to countries adopting measures that disproportionally affect American companies.
Further developments will be reported as they occur.
United States to Impose Higher Tariffs on Steel and Aluminum Products from Key Allies
12 February 2025
Report from our correspondent Kunwar Singh, Attorney, India
Under a revised set of proclamations, the United States will raise tariffs on steel, aluminum, and their derivative imports starting on 12 March 2025. These tariffs will affect imports from several countries, including South Korea, Argentina, Australia, Brazil, Canada, Mexico, the European Union, Japan, the United Kingdom, and Ukraine. The tariff rates will rise from 10% to 25% ad valorem (i.e. based on value) for aluminum and remain at 25% ad valorem for steel, aligning with rates imposed on imports from other nations. This move follows a determination that the significant import surge from these countries threatens US national security.
The executive decision marks the termination of previous agreements that allowed for more favorable tariffs for these nations, as detailed in several proclamations (9740,9759, 9894, and 10783) over the past years. The United States government believes that ending these agreements and implementing the new tariffs will be a more effective way to safeguard domestic production.
Additionally, the United States will discontinue the product exclusion process, meaning no new exemptions will be granted for these tariffs. Any existing exclusions will remain in place until they expire, but all general approved exclusions will end on 12 March 2025, which includes exemptions for Canada and the European Union.
The executive orders imposing these new tariffs on steel and aluminum products were signed by President Donald J. Trump (R) on 10 February (re steel) and 11 February 2025 (re aluminum), respectively.
Note: Earlier this month, The United States paused tariffs on Mexico and Canada imports, which were set to take effect on 4 February 2025. This decision followed commitments from both countries to enhance border security measures. It remains to be seen whether the increase in tariffs on steel and aluminum imports from other countries will face similar reconsideration or adjustments in response to future negotiations or security commitments (seeUnited States Pauses Tariffs on Mexico and Canada After Receiving Border Security Commitments (4 February 2025)).
Trump Reestablishes White House Review of New Tax Rules
Report from our correspondent Stephen Basiaga, J.D., LL.M.
President Trump has reinstated executive review of tax regulations prior to promulgation. Executive Order 14192 (Unleashing Prosperity Through Deregulation), signed 31 January 2025, reestablishes a Memorandum of Agreement between the US Treasury and the Office of Management and Budget (OMB) signed in April 2018. That memo stipulates that the OMB via its Office of Information and Regulatory Affairs (OIRA) will ensure standardized measurement and estimation of regulatory costs.
The reinstated Memorandum of Agreement also provides a framework for OIRA to review tax regulations, and ensuring economic analysis while maintaining timely tax guidance. The Agreement was originally established during Trump's first term and later superseded by the Biden Administration. The Biden Administration order had exempted tax regulations from OIRA review.
The Order further requires that all executive agencies must identify 10 regulations to be eliminated for every new regulation proposed or promulgated, an increase from a similar order issued in Trump's first administration, which required only the elimination of two regulations for each new one. The original 2017 order's requirement, which was rescinded by the Biden Administration, was that agencies offset the costs of new regulations by removing existing regulatory cost burdens, to effectively zero out the net costs of any new regulations. The new order includes a more aggressive requirement, providing that "the total incremental cost of all new regulations, including repealed regulations, being finalized this year, shall be significantly less than zero."
The Order also more broadly defines "regulations" and "rules" to include "memoranda, administrative orders, guidance documents, policy statements, and interagency agreements, regardless of whether the same were enacted through the processes in the Administrative Procedure Act." So, informal IRS guidance, such as Notices, Revenue Procedures, and Revenue Rulings, would appear to be covered by the order's requirements.
Note: The OIRA is a statutory part of the Office of Management and Budget within the Executive Office of the President and the United States. It serves as the central authority for the review of Executive Branch regulations, approval of government information collections, establishment of government statistical practices, and coordination of federal privacy policy. The office is comprised of five subject matter branches and is led by the OIRA Administrator, who is appointed by the President and confirmed by the United States Senate.
Note 2: Executive Order 12866, signed in 1993, set principles for regulatory planning and review, emphasizing the need for cost-benefit analysis and coordination among federal agencies.