A carve-out for US-based corporates from elements of a proposed global minimum tax regime suggests that the whole idea of such a pact is a fool's errand, the firm says.

Andersen, the professional services firm, has said a deal to stop US-based companies paying certain foreign taxes shows that a proposed global minimum corporate tax regime needs to be “put out of its misery.”

Debate centres on how a global minimum corporate tax of 15 per cent, brokered in 2021 by the Paris-headquartered club of industrialised nations, the Organisation for Economic Co-operation and Development (OECD), is being proposed to avoid countries undercutting each other’s corporate tax rates. The former Biden administration had proposed a minimum of 21 per cent, later negotiated down to 15 per cent. (See commentary here.)

The carve-out for US-based corporates suggests that the whole idea needs to be kicked to the kerb, Andrew Parkes, national technical director at Andersen, said in a note yesterday.

"The OECD announcement [yesterday] is another sticking plaster on something that should just be put out of its misery. It once again shows that Pillar 2 is a political project, and nothing to do with tax – the sooner they find a way to save face and let it die, the better for everyone."

Without the latest change, nations could have imposed higher taxes on US companies this year because their US domestic tax rates were too low, reports said. This has angered the Trump administration and Republicans in Congress.

A push for a pact on global minimum taxes highlights a clash between notions of sovereign nations’ rights to set their own taxes and a desire to avoid countries undercutting others in ways that encourage large firms to shuffle profits abroad. Defenders of the status quo say tax competition is a healthy corrective on Big Government and fear global agreements build a sort of tax cartel. Opponents fear a leakage of tax revenues.

Among the details, the OECD announced yesterday that new “safe harbours” are available to multinational enterprises (MNEs) that have a parent entity located in an eligible jurisdiction which meets minimum taxation requirements.

“Following months of intense negotiations, the comprehensive package for a `side by side’ arrangement announced today represents a significant political and technical agreement which will set the foundation for stability and certainty in the international tax system,” the OECD said. “It will preserve the gains achieved so far in the global minimum tax framework and protect the ability for all jurisdictions, particularly developing countries, to have first taxing rights over income generated in their jurisdictions.”