US, G7 allies agree on tax framework, scrap 'discriminatory' clause

By Daniel Flatley  The US and fellow Group of Seven nations signed off on an agreement aimed at averting a global tax war, by creating a “side-by-side” system that would exempt US companies from some elements of an existing global agreement.

 

As part of the deal, US officials agreed to remove a provision from President Donald Trump’s tax-cut bill that would have increased taxes on the US income of non-US-based businesses and individuals. Known as Section 899, it came to be called the “revenge tax” because it would increase tax rates only for countries whose tax policies Washington deems discriminatory.

 

 

The side-by-side system could “provide greater stability and certainty in the international tax system moving forward,” the G7 advanced economies said Saturday in a statement.

 

As part of the agreement, the other G7 members will support the US’s position in negotiations with Group of 20 countries and the Organization for Economic Cooperation and Development, which has been hosting global talks on corporate taxes, with some proposals drawing opposition from the US.

 

Officials from the G7 said they look forward to coming up with a solution that is “acceptable and implementable to all,” according to the statement.

 

Left only partially addressed is the issue of “digital services taxes,” which some countries levy on the profits of US-based technology companies including Meta Platforms Inc. and Amazon.com Inc.

 

The effort to establish a side-by-side system will include a “constructive dialogue on the taxation of the digital economy and on preserving the tax sovereignty of all countries,” according to the G7 statement.

 

US Treasury Secretary Scott Bessent said Thursday that he had asked Senate and House leadership to remove Section 899 from the so-called One Big Beautiful Bill Act after securing G7 backing for the side-by-side system. Senate Republicans deleted the section in the latest version of the tax bill. 

 

The removal of the revenge tax was key to securing the agreement among the G7 nations, according to the statement.

 

“We also recognize that the removal of Section 899 is crucial to this overall understanding and to providing a more stable environment for discussions to take place” on global corporate taxation, the G7 said.   (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)