The document instructs the Treasury Secretary to notify the OECD that any commitments made by the prior Biden Administration with respect to the Global Tax Deal have no force or effect within the United States absent an act by Congress adopting the relevant provisions of the Global Tax Deal.
The Memorandum also directs the Treasury Secretary, in consultation with the United States Trade Representative (USTR), to investigate whether any foreign countries are not in compliance with any tax treaty with the US or have any tax rules in place, or are likely to put tax rules in place, that are extraterritorial or disproportionately affect American companies, and develop and present President Trump within 60 days (approximately 21 March 2025) a list of options for protective measures or other actions that the US may adopt or take in response to such non-compliance or tax rules.
‘Defending American Jobs and Investment Act’
On the same day, the House of Representatives Ways and Means Committee Chairman Jason Smith (R-MO), along with every Ways and Means Committee Republican, introduced H.R. 591, the ‘Defending American Jobs and Investment Act’ (DAJIA). In a statement alongside the introduction of the bill, Chairman Smith indicated that DAJIA was intended to reinforce the ‘Global Tax Deal’ Memorandum, ensuring that “President Trump has every tool at his disposal to pushback against any foreign country that seeks to undermine America’s economic vitality or unfairly target our workers and businesses”.
The bill proposes a 5 percent addition to the tax rate each year for four years on the US income of individuals and entities located in a foreign jurisdiction that imposes a discriminatory or extraterritorial tax, such as an undertaxed payments rule (UTPR) or digital services tax (DST). After four years, the cumulative 20 percent additional tax would be imposed each year the targeted tax remains in effect.
Further commentary on DAJIA, together with an update on the ongoing US Budget Reconciliation process, is included in Tim Sarson’s International Tax Review for February published in Tax Journal, a copy of which will be included in the next edition of Tax Matters Digest.
‘America First Trade Policy’ Memorandum
Also on 20 January 2025, President Trump issued the ‘America First Trade Policy’ Memorandumopens in a new tab that instructs a separate investigation into whether any foreign country subjects US citizens or corporations to discriminatory or extraterritorial taxes pursuant to section 891 of the US tax code. Section 891 provides that US taxes may be doubled on citizens and corporations of countries that the President finds have discriminatory or extraterritorial taxes. The Memorandum requires the conclusion of this investigation to be outlined in a report to be delivered to the White House by 1 April 2025.
‘America First Investment Policy’ Memorandum
On 21 February 2025, President Trump signed the ‘America First Investment Policy’ Memorandumopens in a new tab stating that the US will use all necessary legal instruments to further deter US persons from investing in China’s military-industrial sector. The memorandum specifically states that the Trump Administration will review whether to suspend or terminate the 1984 US-China income tax treaty.
‘Defending American Companies and Innovators from Overseas Extortion and Unfair Fines and Penalties’ Memorandum
On 21 February 2025, another Memorandum ‘Defending American Companies and Innovators from Overseas Extortion and Unfair Fines and Penalties’opens in a new tab was released. This sets out the Administration’s plans to respond to the enactment by foreign governments of digital service taxes (DSTs) targeted at US companies, as well as the adoption by foreign governments of regulations on digital services in general.
As explained in the accompanying White House fact sheetopens in a new tab:
- The Administration will consider responsive actions like tariffs as a response to DSTs, fines, practices, and policies that foreign governments levy on US companies;
- The Memorandum specifically directs the USTR to renew investigations under Section 301 of the Trade Act of 1974 into DSTs of France, Austria, Italy, Spain, Turkey and the UK, which were initiated on 16 July 2019 and 5 June 2020, and to investigate any additional countries adopting DSTs that discriminate against US companies. The Memorandum also directs the USTR to investigate Canada’s DST under Section 302(b) of the Trade Act of 1974;
- The Administration will review whether any acts, policies, or practices in the EU or the UK incentivises companies to develop or use technology in ways that undermine free speech or foster censorship; and
- The Administration will scrutinise EU regulations such as the Digital Markets Act and the Digital Services Act.
The Memorandum directs the Treasury Secretary, in consultation with the Commerce Secretary and the USTR, to determine whether any foreign country subjects US citizens or companies to discriminatory or extraterritorial taxes, inconsistent with any US tax treaty or otherwise actionable under section 891 of the US Tax Code. The Treasury Secretary is directed to report the results of such determination as part of the report required by the White House under the ‘Global Tax Deal’ Memorandum above.
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