Presidential Memorandum Rejecting OECD Global Tax Deal: Implications for U.S. Sovereignty and Business

What is the presidential action?

On January 20, 2025, the President issued a memorandum rejecting the commitments made under the OECD Global Tax Deal by the previous administration. The directive instructs the Secretary of the Treasury and U.S. Trade Representative to formally notify the Organization for Economic Co-operation and Development (OECD) that the U.S. no longer recognizes or abides by the deal’s terms unless Congress enacts relevant provisions.

Why this presidential action has been taken (intent)?

The President’s memorandum aims to:

1. Preserve U.S. Tax Policy Sovereignty – Ensuring the U.S. can set its own tax rates without international interference.
2. Protect American Businesses – Shielding multinational corporations from foreign taxation that could reduce competitiveness.
3. Prevent Retaliatory Tax Measures – Addressing concerns that foreign nations may impose discriminatory taxes on U.S. firms.
4. Encourage Domestic Investment – Keeping corporations incentivized to invest in U.S.-based operations.

What is the background/context and intent for taking this presidential action?

The OECD Global Tax Deal, introduced in 2021 and agreed upon by 140+ nations, aimed to implement a global minimum corporate tax rate of 15% and new tax rules for multinational corporations.

• $150 billion: Estimated annual revenue expected from enforcing the global tax deal. (Source: OECD 2023 Report)
• 55% of Fortune 500 companies operate internationally and would be directly affected. (Source: U.S. Chamber of Commerce)
• Over 70% of Americans express concern about foreign influence on U.S. economic policy. (Source: Pew Research Center 2024)

What is going to be the impact on people (short-term and long-term)?

Short-Term Impact:

• U.S. Multinational Corporations Avoid New Global Tax Burdens – Large firms keep more revenue.
• Potential Trade Tensions – Countries aligned with OECD may retaliate by imposing new tariffs or tax penalties on American firms.
• Increased Market Confidence – Businesses uncertain about international tax obligations may see temporary stability.

Long-Term Impact:

• Possible Foreign Backlash – Nations may introduce digital services taxes targeting U.S. companies.
• Shift in Global Economic Alliances – The U.S. rejecting the deal may weaken cooperation in future economic negotiations.
• Implications for Federal Revenue – Rejecting the OECD tax framework could limit future U.S. tax revenue expansion.

What are the performance and impact parameters to determine success?

1. U.S. Corporate Tax Revenues – Tracking whether U.S. companies retain earnings or face retaliatory tax burdens. (Source: IRS, Treasury Reports)
2. Foreign Retaliation Measures – Monitoring global policy shifts that may disadvantage American businesses. (Source: U.S. Trade Representative Reports)
3. Investment Trends – Evaluating domestic vs. international investment levels post-memorandum. (Source: Bureau of Economic Analysis)
4. Public Perception – Analyzing American attitudes toward the policy shift. (Source: Pew Research Polls)

How is this executive order perceived across ideologies?

While mainstream outlets focus on political narratives, an underreported angle is how this move impacts small- and medium-sized U.S. businesses operating internationally. While large multinational corporations may benefit from lower tax liabilities, smaller firms may face increased scrutiny or taxation in foreign markets, making overseas expansion riskier.

• Conservatives (Right): Strongly support the rejection of the OECD deal, viewing it as a defense of U.S. economic independence.
• Moderates (Center): Mixed reactions—some favor sovereignty, while others fear economic retaliation from OECD-aligned nations.
• Progressives: Oppose the decision, arguing that a global tax framework reduces corporate tax avoidance and promotes fair taxation.
• Leftists: Strongly oppose, citing the rejection as corporate favoritism and a loss of potential revenue for public programs.

(Sources: Gallup Political Polls, Congressional Budget Office 2024 Reports)

Is this executive order legal according to the Constitution?

• The President has the authority to withdraw the U.S. from international agreements not ratified by Congress, making this memorandum legally sound.
• However, trade and tax treaties with other nations may limit how effectively the U.S. can shield corporations from foreign taxation. (Source: Congressional Research Service, International Trade Law Analysis)

The rejection of the OECD Global Tax Deal marks a major shift in U.S. economic policy, prioritizing domestic control over tax laws at the potential cost of international backlash. Whether this move strengthens the U.S. economy or isolates it from key global markets will depend on future diplomatic negotiations and corporate responses.