Former U.S. OECD Negotiator Talks Trump's Global Tax Impact
Jan 31, 2025
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Scott Levine, former U.S. Chief OECD Tax Negotiator and Deputy Assistant Secretary for International Tax Affairs, shares his insights on President Trump’s executive order affecting the OECD's global tax deal. He discusses the potential impacts of U.S. non-participation in international tax frameworks and challenges such as Digital Services Taxes. Levine reflects on his tenure at Treasury, highlighting triumphs and trials, while sharing wisdom for future negotiators on fostering international collaboration in tax policy.
President Trump's executive order introduces a cooling-off period, suggesting potential for negotiation within the OECD's two-pillar tax project.
The U.S. faces challenges in maintaining its tax incentives while needing to align with global regulations to avoid non-compliance.
Deep dives
Implications of Trump's Executive Order
The executive order issued by President Trump on Inauguration Day raises concerns about the future of U.S. participation in the OECD's two-pillar project, which aims to modernize international taxation. Although the order may suggest a withdrawal from multilateralism, it does not explicitly state that the U.S. will exit the OECD framework. Instead, it introduces a 60-day cooling-off period that allows for further contemplation before any drastic actions are taken. This indicates that while there are uncertainties, there is still an opportunity for negotiation and potential compromise.
Impact on Pillar 2 Negotiations
The ongoing negotiations surrounding Pillar 2 could either be severely challenged or adapted to include U.S. interests given the new administration's stance. Concerns include the potential for the U.S. to be seen as non-compliant while European jurisdictions have already enacted their measures under the directive. The possibility remains for the U.S. to negotiate exemptions or protections, particularly related to its R&D credit and other domestic incentives, to maintain competitiveness within the global tax landscape. Exploring these options will be crucial in moving forward and finding common ground with other jurisdictions in the inclusive framework.
Challenges in Global Tax Policy
The discussion on safeguarding U.S. tax incentives, like the R&D credit, highlights the broader dilemma of creating a globally coherent tax policy. Concerns arise about how tax incentives focused on attracting income may clash with global regulations aimed at preventing base erosion. Any solutions will need to strive for a balance that encourages domestic investment while abiding by international standards set forth by the OECD. Furthermore, the complex nature of the negotiations necessitates continued administrative guidance to address the unique challenges each jurisdiction faces in this evolving tax environment.
The Future of Multilateralism
The current U.S. administration's shift away from embracing multilateralism raises questions about the future functioning of the inclusive framework. While some fear a retreat from cooperative agreements, there are indications that the U.S. recognizes the efficiency and benefits that multilateral negotiations offer. Importantly, the role of the U.S. in addressing critical issues like exchange of information and fair tax policies remains vital. The hope is to foster an environment where various stakeholders can work collaboratively to resolve ongoing challenges, thus preserving the benefits of multilateral engagements.
Scott Levine, former Treasury deputy assistant secretary for international tax affairs, discusses President Trump’s executive order on the OECD’s global tax deal and its potential impact on the two-pillar project.
Listen to our previous episodes on the two pillars here:
** This episode is sponsored by the University of California Irvine School of Law Graduate Tax Program. For more information, visit law.uci.edu/gradtax.
*** Credits Host: David D. Stewart Executive Producers: Jasper B. Smith, Paige Jones Showrunner: Jordan Parrish Audio Engineers: Jordan Parrish, Peyton Rhodes
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