Treasury Deal Halts ‘Revenge Tax’ That Spooked Wall Street

The US Treasury building in Washington, DC, US, on Thursday, Aug. 29, 2024. The Treasury Department finalized rules Wednesday on reporting requirements for certain real estate transactions in an effort to crack down on money laundering in the US residential real estate sector. Photo by Kent Nishimura /Bloomberg

Article content

(Bloomberg) — The Treasury Department announced a deal with G-7 allies that will exclude US companies from some taxes imposed by other countries in exchange for removing the Section 899 “revenge tax” proposal from President Donald Trump’s tax bill.

Article content

“OECD Pillar 2 taxes will not apply to U.S. companies, and we will work cooperatively to implement this agreement across the OECD-G20 Inclusive Framework in coming weeks and months,” Treasury Secretary Scott Bessent said on social media Thursday.

Article content

Article content

Article content

“Based on this progress and understanding, I have asked the Senate and House to remove the Section 899 protective measure from consideration in the One, Big, Beautiful Bill,” he added.

Article content

Article content

Representatives for House Speaker Mike Johnson and Senate Majority Leader John Thune did not immediately respond to requests for comment about if they would remove the revenge tax measure from the bill.

Article content

The provision, officially known as Section 899 and informally known as the “revenge tax,” was drafted by House Republicans and supported by the White House to counter several European countries, Canada, Australia and more nations from taxing US firms in a way GOP lawmakers argue is discriminatory.

Article content

The tax has sparked fears on Wall Street that the proposal would make it much harder for foreign individuals and companies to invest in the US. The levy targets allies that have digital services taxes on US tech companies, as well as countries imposing a global minimum tax on corporations.

Article content

The measure included in Trump’s bill came to be known as the revenge tax because it would increase tax rates only for countries whose tax policies the US deems “discriminatory.”

Article content

Article content

Deputy Treasury Secretary Michael Faulkender told Bloomberg News on Wednesday that administration officials were close to a “breakthrough” that would eliminate the need for the revenge tax proposal in Trump’s tax bill.

Article content

The Organization for Economic Co-operation and Development has been hosting global talks over corporate taxes, with some of the proposals drawing opposition from the US.

Article content

Earlier: Treasury Close to Deal That Would Make ‘Revenge Tax’ Irrelevant

Article content

The revenge tax targeted a part of the OECD’s 15% global minimum tax that former Treasury Secretary Janet Yellen helped negotiate while former President Joe Biden was in office. Republicans and Trump administration officials have criticized the deal for ceding US taxing authority to other countries.

Article content

The global minimum tax is part of a larger deal agreed to by more 140 countries at the OECD that seeks to impose a 15% minimum tax rate on multinational companies in every country where they operate.

Article content

Trump’s Treasury in recent weeks has pushed for the US tax system to be considered completely separate from the OECD’s global tax framework, arguing that the US already robustly taxes income that American companies earn overseas.

Article content

(Updates with additional details throughout)

Article content