G7 Agrees to Exempt U.S. Firms from Global Minimum Tax, Marking Shift in International Tax Deal

Key Points

• It seems likely that US multinationals will receive a reprieve from the global minimum tax following a recent G7 deal.

• Research suggests the deal exempts US companies from a 15% global minimum tax rate, avoiding additional tax liabilities.

• There is controversy around whether this undermines global tax fairness, with some critics arguing it weakens international cooperation.

Background

The global minimum tax, set at 15% under a 2021 OECD deal, aims to ensure large multinationals pay taxes in every jurisdiction. However, recent negotiations with the G7 have led to an agreement that may exempt US companies, sparking debate.

The G7 Deal

The G7 has agreed to a "side-by-side" tax system, allowing the US to maintain its own tax framework. This means US multinationals won't face penalties under the global minimum tax, announced by Treasury Secretary Scott Bessent on June 26, 2025 .

Impact on US Multinationals

This reprieve means US companies won't have to pay the 15% minimum tax in jurisdictions where their effective rate is lower, potentially saving them significant costs. The deal also drops a proposed "revenge tax" on foreign companies, easing tensions .

Controversy and Outlook

While this benefits US firms, some argue it could undermine global tax efforts, with critics like the Tax Justice Network calling it a blow to the 2021 deal . The market has reacted positively, but long-term impacts on international tax cooperation remain uncertain.

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A Comprehensive Analysis of US Multinationals Receiving a Minimum Tax Reprieve After G7 Deal

As of 09:37 AM PDT on Saturday, June 28, 2025, US multinationals are on track for a significant reprieve from the global minimum tax following a recent agreement between the US and G7 nations. This note provides a detailed examination of the deal, its implications for US companies, and the broader context of global tax policy, drawing from recent reports and analyses.

Context and Background

In 2021, over 140 countries, including the US, agreed to a global minimum corporate tax rate of 15% under the OECD's Pillar Two framework. This agreement, part of a broader effort to combat tax avoidance and profit shifting, requires large multinational enterprises (MNEs) with revenues over €750 million to pay a minimum level of tax in each jurisdiction where they operate. The framework was implemented in 2024 in key jurisdictions like the EU, UK, Canada, and Japan, aiming to ensure fair taxation of multinationals globally .

However, the Trump administration has opposed certain aspects of this deal, particularly the application of penalties to US companies operating abroad. This opposition led to tensions, with the US proposing a "revenge tax" (also called the "Unfair Foreign Taxes" provision) as part of its tax bill, which would have imposed additional taxes on foreign companies operating in the US if their home countries were deemed to have "discriminatory" tax policies .

Details of the G7 Deal

On Thursday, June 26, 2025, US Treasury Secretary Scott Bessent announced a deal with the G7 that exempts US multinationals from the OECD Pillar Two taxes, effectively removing the 15% global minimum tax requirement for US companies .

Key aspects of the deal include:

• Exemption from Pillar Two Taxes: US companies will not be subject to the 15% global minimum tax rate under Pillar Two, meaning they won't face additional tax liabilities in jurisdictions where their effective tax rate is below 15%.

• Side-by-Side Tax Systems: The agreement allows for a "side-by-side" tax system, where the US maintains its own tax regime alongside the global framework, avoiding penalties for US companies under the global minimum tax deal.

• Dropping the "Revenge Tax": The US has dropped its proposed "revenge tax," which could have increased tax rates on foreign companies by up to 20 percentage points and was estimated to cost companies over $50 billion over a decade. This was recommended by Bessent and is part of the GOP tax bill adjustments .

• Preservation of Tax Sovereignty: The G7 statement emphasizes facilitating progress on stabilizing the international tax system, constructive dialogue on digital economy taxation, and preserving the tax sovereignty of all countries .

The deal was announced to prevent a potential global tax war, easing concerns among multinational corporations and avoiding a fight with the US over tax policy .

Impact on US Multinationals

The reprieve from the global minimum tax provides several benefits for US multinationals:

• No Additional Tax Liabilities: US companies will not have to pay the 15% minimum tax in jurisdictions where their effective tax rate is lower, potentially saving significant costs. This is particularly relevant for companies with operations in low-tax jurisdictions.

• Competitive Advantage: By exempting US companies from the global minimum tax, the US may enhance its attractiveness as a business hub, potentially encouraging more corporate investment domestically.

• Market Stability: The deal avoids escalation of tax disputes, stabilizing the international tax environment for US firms and reducing uncertainty for investors.

However, this exemption could lead to concerns about fairness, as other countries may lose tax revenue from US companies operating in their jurisdictions .

Controversy and Broader Implications

The deal has sparked controversy, with critics arguing that it undermines the global effort to ensure fair taxation of multinationals. The Tax Justice Network described it as effectively "pronouncing the global tax deal dead," since it strips much of the substance from the 15% minimum tax agreement . This could set a precedent for other countries to seek similar exemptions, potentially weakening the international tax framework.

Market reactions have been mixed, with corporate lobbyists welcoming the deal due to the removal of the "revenge tax," which faced strong opposition . However, some analysts worry about the long-term implications for global tax cooperation, particularly as other nations may retaliate with their own tax measures.

Historical Context

The 2021 OECD deal was a landmark agreement, aiming to address the challenges of digital economy taxation and profit shifting by multinationals. The US's initial support, followed by opposition under Trump, reflects ongoing tensions between national sovereignty and international cooperation on tax policy. This deal marks a significant shift, highlighting the US's willingness to prioritize domestic interests over global consensus .

Conclusion

As of June 28, 2025, the G7 deal provides US multinationals with a reprieve from the 15% global minimum tax, exempting them from OECD Pillar Two taxes and dropping the proposed "revenge tax." This benefits US companies by avoiding additional tax liabilities and stabilizing the international tax environment, though it raises concerns about global tax fairness and could weaken international cooperation. The long-term impact on the global tax landscape remains to be seen, with potential implications for future tax negotiations.

Key Citations

• G7 Backs Plan for Side-by-Side Tax System to Avoid U.S. Fight - New York Times

• Trump Forces the Rest of the World to Exempt US Companies from Global Tax on Multinationals - Le Monde

• Bessent Says Proposed Revenge Tax No Longer Needed - Wall Street Journal

• G7 Hasty Cave In Would Finally Pronounce Global Tax Deal Dead - Tax Justice Network

• US to drop Unfair Foreign Taxes from budget bill, G7 to exempt US companies from Pillar Two - Regfollower

• White House drops FDI revenge tax as G7 agrees to US exemption - FDI Intelligence

• G7 Global Minimum Tax Agreement with the US announced - ATOZ.LU

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