US Treasury asks Congress to scrap foreign revenge tax in Trump bill

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The US Treasury department has called on Congress to scrap a provision in Donald Trump’s flagship budget bill that would allow Washington to raise taxes on foreign investments, reversing a plan that had spooked Wall Street.

Treasury secretary Scott Bessent said on Thursday that the measure was no longer needed because he had secured concessions for US companies to the new OECD global minimum tax regime.

He added that the agreement would prevent such groups from having to pay more than $100bn to foreign governments over the next decade, according to Treasury estimates.

Bessent said on X that his agency had asked lawmakers to remove the so-called Section 899 provision in Trump’s “big, beautiful” budget bill.

The legislation has already passed the House of Representatives and is under consideration in the Senate, with a vote potentially coming as soon as this weekend. The Republican chairs of the powerful Senate Finance and House Ways and Means committees said late on Thursday that they plan to drop the measure from the bill.

Section 899 would allow the US government to impose retaliatory taxes on companies and investors from countries that it deemed to have punitive tax policies — such as those allowed under the OECD regime.

Some banks and investors had argued that Section 899 could trigger a retreat from US assets and sharply cool corporate investment.

Bessent said the US had reached an “understanding” with other members of the G7 group of leading nations, which dominate the OECD, that would make Section 899 unnecessary.

He said that, under the deal, which the G7 would seek to implement in coming weeks and months, “OECD Pillar 2 taxes will not apply to US companies”.

Pillar 2 of the new OECD regime, which started to take effect this year, introduces a global minimum 15 per cent corporate tax rate, and allows other states to collect the levies if companies’ home countries do not.

An EU official hailed the provisional US-G7 deal while cautioning that it still needed to be formally adopted by the OECD next week.

Another official said that the principal idea would be for other jurisdictions to exempt US companies on the grounds that various US taxing schemes are “broadly equivalent”.

“It sounds like the US is getting a lot of what they wanted,” said Alex Parker, tax legislative affairs director at Eide Bailly, though he noted some confusion as to which of the Pillar 2 measures would be removed. 

UK chancellor Rachel Reeves also described the Treasury secretary’s call on Congress to scrap Section 899 as “important”, saying the progress provided “certainty for business”.

Canadian finance minister François-Philippe Champagne also welcomed the move to scrap the measure.

Parker said that, while the removal of Section 899 was a big step for G7 governments, there were other aspects of the US tax code, such as Section 891, that retaliate against taxpayers from countries where the US alleges discriminatory taxation.

The global minimum tax was designed as one half of a groundbreaking deal agreed by more than 135 countries at the OECD in 2021 to prevent tax avoidance by multinationals and update the international tax system for a digital age.

The first “pillar” of the deal, which aimed to close tax loopholes for Big Tech groups and multinationals, has not been enacted. The second pillar, the global minimum tax, was implemented by several countries in 2024.

The OECD deal had been supported by the US Treasury under the Biden administration but had not been passed by Congress, due in part to resistance from Republicans. When the Trump administration came to power it took a hostile stance to the agreement.

Republicans have been particularly unhappy about part of the OECD deal called the undertaxed profits rule, which would allow other countries to levy top-up taxes on US companies.

The rule, which they have branded as “discriminatory”, would permit governments to increase taxes on a local subsidiary of a multinational group if the multinational paid less than 15 per cent in corporate tax in any other jurisdiction.  

Additional reporting by Paola Tamma in Brussels and Ilya Gridneff in Toronto