A ‘Revenge Tax' Victory for Congress

Wall Street Journal

7 hours ago

Remember those news reports a few weeks ago about a 'revenge tax' that was going to kill American financial markets? Well, our competitors in pink were wrong again. Treasury Secretary Scott Bessent announced Thursday that he'll ask Congress to ditch the tax—because the provision worked.
At issue is a passage in the GOP's budget behemoth to retaliate against governments that impose 'unfair foreign taxes' on U.S. companies. Section 899, as it's known, took aim specifically at an effort at the Organization for Economic Cooperation and Development to harmonize global corporate tax rules. Mr. Bessent has reached an agreement with finance ministers from Group of Seven countries to exempt U.S. companies from the most onerous part of the OECD tax system, he wrote Thursday on X.com.
The deal concerns pillar two of the OECD plan, which imposes a corporate alternative minimum tax at a rate of 15%. Governments around the world adopted this in 2021 in an effort to mute tax competition from lower-tax jurisdictions such as Ireland. Companies subject to U.S. taxation now will be exempt from this minimum tax, Mr. Bessent said. We noted weeks ago that this was the simplest, and likeliest, solution to this impasse.
America, which could hardly be described as a tax haven, was never a target of the OECD provision. Congress created its own global minimum-tax regime in the 2017 Tax Cuts and Jobs Act, known as Gilti (we'll spare you the full name). But U.S. companies were at risk of getting caught in the crossfire because U.S. law and the OECD's pillar two define the corporate tax base differently, such as with different treatment of tax credits.