A revised international agreement preserves a 15% minimum corporate tax while exempting U.S. multinationals from key enforcement rules. That means the OECD agreement will move forward, but critics argue the carve-outs will weaken enforcement and reduce revenues.
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After years of negotiations, the Organization for Economic Cooperation and Development (OECD) has announced a revised agreement on global minimum corporate taxes — a deal intended to limit the ability of large multinational corporations to shift profits to low-tax jurisdictions. While the framework remains in place, critics say the latest changes carve out protections for U.S. companies that weaken the original goal.
You may recall that President Trump isn’t a fan of the tax deal. One of his first directives in his second term was to advise the Secretary of the Treasury, the U.S. Trade Representative, and the U.S. Permanent Representative to the OECD to notify the organization that any commitments made by the prior administration “with respect to the Global Tax Deal have no force or effect within the United States absent an act by the Congress adopting the relevant provisions of the Global Tax Deal.”
The OECD, which includes the US, is a forum of 38 mostly wealthy countries that works to set common standards on economic policy, including taxation. Headquartered in Paris, the OECD generally believes that the current system gives multinational companies—those that can easily move their operations and property across borders—an unfair advantage over domestic businesses. More importantly, the OECD believes that when taxpayers see multinational corporations avoiding paying taxes, even if it is done legally, it undermines all voluntary compliance.
(You can find out more about the OECD here.)
Pillars One And Two
For years, these challenges have been broken down into two sets of talking points, or pillars. You’ve probably heard them referred to as Pillars One and Two.
Pillar One focuses on where tax should be paid. You can think of it in terms of nexus, similar to the kinds of discussions we have in the U.S. between states. The key question is: Who has the right to tax income even if there’s no physical presence?
Pillar Two examines the amount of tax to be paid, with an eye toward unequal tax rates across countries. The goal has been to establish a global minimum corporate tax rate of 15%.
As of last year, more than 140 countries had, in theory, agreed to the pillars. Until 2025, that included the U.S.
The current agreement primarily affects Pillar Two and includes exceptions tailored to the U.S. Not everyone is a fan of those changes.
“This deal risks nearly a decade of global progress on corporate taxation only to allow the largest, most profitable American companies to keep parking profits in tax havens,” said Zorka Milin, policy director at the FACT Coalition. “The Trump administration has chosen to prioritize maintaining rock-bottom taxes for big corporations to the detriment of ordinary Americans and our allies across the globe.”
Milin said that while U.S. multinational corporations remain among the most competitive and innovative in the world, that success has not always translated into fair tax contributions.
“Large U.S. multinational corporations have always been among the most competitive, innovative, and successful in the world. What they have not always done, however, is pay their fair share of taxes,” she said. “While the U.S. government has defended this deal as a win for ‘tax sovereignty,’ it actually does nothing for the U.S. public revenues. The best way to protect American companies from ‘extraterritorial taxation’ is not to demand special treatment, but to ensure that these companies pay their fair share at home.”
What The Deal Does — And Doesn’t — Change
Milin and Thomas Georges, the FACT Coalition’s policy officer, said the revised agreement preserves the basic structure of the global minimum tax but weakens some of its enforcement mechanisms. Still, they argue that the central achievement of the global minimum tax remains intact.
Specifically, they note that “the original promise and achievement of the global minimum tax remains in place, and key portions of it will continue to apply to U.S. companies, despite this new agreement.”
More than 60 countries have now adopted domestic minimum taxes, meaning companies operating in those jurisdictions must still pay a minimum level of tax regardless of where they report profits. According to the coalition, this widespread adoption is the most important success of the OECD’s Pillar Two effort and is unaffected by the new “side-by-side” arrangement.
What has changed, they said, is how countries can respond when profits are not adequately taxed anywhere. Under the revised deal, U.S. companies will be insulated from two international “backstop” rules — the Income Inclusion Rule and the Undertaxed Profits Rule — which allow other countries to impose additional taxes when both the local jurisdiction and the company’s home country fail to do so.
While the overall revenue impact remains uncertain, Milin and Georges said the exemption could be costly. In the Netherlands alone, the government has estimated the change could reduce tax revenue by roughly €120 million ($141 million U.S.) per year.
Will It Curb Profit Shifting?
Whether the global minimum tax will meaningfully reduce profit shifting remains an open question. Profit shifting happens when companies move profits from country to country to take advantage of lower tax rates when there’s no effective leveling mechanism, essentially tax-home shopping. Milin and Georges expect the issue to be addressed during a formal OECD stocktake scheduled for 2029.
“Whether Pillar Two will be effective in meaningfully reducing profit shifting remains to be seen,” they said. “But there is no doubt that the global minimum tax, even watered down, is still more effective than not having any floor at all.”
Critics argue that exempting U.S. companies undermines the idea of a truly global minimum tax. Milin and Georges acknowledged that excluding a large economy like the U.S. weakens the framework’s legitimacy, but noted that similar principles already exist in U.S. law.
“While exempting a large economy like the U.S. weakens the effectiveness and legitimacy of the global minimum tax, we shouldn’t forget that the core principle behind it is also present in U.S. rules,” Milin said, pointing to U.S. tax reforms enacted in 2017 that require corporations to pay a minimum level of tax on foreign income.
Under the agreement, U.S. rules such as Global Intangible Low-Taxed Income — previously referred to as GILTI and now given the much less exciting name, Net CFC Tested Income — are treated as a functional substitute for Pillar Two of the OECD framework, despite important differences between the two systems. As a result, Milin and Georges said, other countries will no longer be able to impose top-up taxes on U.S. companies when those U.S. rules fall short of the global standard. However, they emphasized that nothing in the agreement prevents the U.S. from strengthening its own corporate tax laws.
In some respects, the deal may actually limit the ability of future U.S. administrations to further weaken corporate taxation. To qualify for the exemption, the U.S. must maintain a corporate tax rate of at least 20%, and robustly tax the foreign and domestic profits of its big corporations, they explained. And, any further weakening of GILTI or the Corporate Alternative Minimum Tax (CAMT) would jeopardize the exemptions for U.S. corporations.
What Comes Next
Despite its shortcomings, Milin and Georges said the agreement is preferable to abandoning the global minimum tax altogether or triggering trade retaliation, saying, “This deal is regrettable, but it is still preferable to either the complete abandonment of the global minimum tax or to the punitive tax and trade actions threatened by members of Congress and the Trump administration.”
Meaningful improvements will ultimately depend on changes to U.S. tax law rather than additional international negotiations. “The U.S. should end all tax incentives for outsourcing,” they said, calling for corporate foreign income to be taxed at the same rate as domestic income and for the elimination of unnecessary exemptions and incentives such as foreign oil and gas extraction income (FOGEI) and foreign-derived deduction eligible income (FDDEI).
Those countries that have agreed to the deal still have to pass laws to implement it—how long that takes could impact the tax bills of U.S. companies. “There is a real possibility that some U.S. multinationals may still face top-up taxes in the short term,” Milin said, “regardless of the new side-by-side system.”