President Donald Trump reportedly threatened to undertake the retaliatory move of doubling tax rates for foreign nationals and companies.
The possible move is intended to hit back at "discriminatory" levies on American multinationals.
Trump on Monday issued a memo outlining his "America First" trade policy. It referred to an obscure 90-year-old provision of the U.S. tax code that empowers him to impose punitive taxes on foreign countries and their citizens and businesses, Financial Times reported.
Trump ordered the Treasury Department to "investigate whether any foreign country subjects United States citizens or corporations to discriminatory or extraterritorial taxes" pursuant to the tax code known as Section 891, The Times of London reported.
That statute became law in the 1930s when the U.S. and France argued over taxes on U.S. businesses.
Alex Parker, the tax legal affairs director at the business advisory firm Eide Bailly, said Trump's order "initiates the process to apply Section 891," a "century-old, never-used statute" that would allow the Treasury to "double taxes on taxpayers from countries engaging in discrimination against the U.S.," The Times of London reported.
News of the potential tax increase on foreign nationals and businesses came amid Trump's intentions to hit the European Union with tariffs.
During his first full day in office Monday, Trump effectively withdrew the U.S. from a 2021 global agreement that aimed to stop tax avoidance by multinational companies. The deal, signed by 130 countries, required companies to pay a global minimum corporation tax rate of 15%.
Although Congress never approved measures to bring the U.S. into compliance with the agreement, U.S. companies are subject to a global minimum tax of about 10%. Countries including the U.K., though, have adopted the 15% global minimum tax and could pursue U.S. companies for a top-up tax if they are paying a lower rate, The Times of London reported.
Trump wrote that his memo "recaptures our nation's sovereignty and economic competitiveness by clarifying that the Global Tax Deal has no force or effect in the United States."
"This is likely aimed at jurisdictions where corporations have housed a lot of their intellectual property like Ireland, and it also likely gets at what the EU is doing on trying to extract more revenues from U.S. tech companies," Everett Eissenstat, a partner at the international law firm Squire Patton Boggs, told the Financial Times.
Reuters contributed to this story.
Charlie McCarthy ✉
Charlie McCarthy, a writer/editor at Newsmax, has nearly 40 years of experience covering news, sports, and politics.
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