The Trump Effect on Global Tax Policy – Past, Present, and Future with UN Global Tax Ambitions

Introduction

History has shown that global tax policies are synonymous with US tax policies. This underscores the pivotal role the US plays in shaping the direction of global tax rules regardless of who is spearheading it: The OECD or the UN. Take for instance, the highly controversial Two-Pillar solution of the OECD is largely a mirror image(with little variations) of the US 2017 Tax Reform carried out during the last administration of President Donald Trump. Despite the variations to make it a global rule, it has been seen to largely tilt in favor of the US as well as other wealthy nations to the detriment of developing ones.

This created a general dissatisfaction among many countries leading to the UN recently moving to take over global tax rules. This same move by the UN was vehemently opposed by the US in the last event held for the adoption of the Terms of Reference(ToR) established to provide a framework for the discussions on a new UN Tax Convention (refer to the previous edition). Though this happened during the Biden administration, what could become of the global tax system under Trump’s Presidency?

Let’s look at these stages—Trump’s past reforms, the current administration’s direction, and future implications under Trump—in the context of the UN’s goal of creating a more equitable tax framework.

Trump’s First Missionary Journey( 2017-2021): The Tax Cuts and Jobs Act (TCJA) and Its Global Ripple Effect

The Trump administration’s Tax Cuts and Jobs Act (TCJA) of 2017 transformed U.S. tax policy in ways that reverberated worldwide. Key measures included:

1. Lowering the U.S. Corporate Tax Rate: Reducing the corporate tax rate from 35% to 21% made the U.S. far more competitive and triggered a wave of similar tax cuts globally, as nations sought to keep their markets attractive for multinationals.
2. Adopting a Territorial Tax System: The TCJA’s move toward a territorial tax system allowed U.S. multinationals to bring foreign profits home without high penalties. While this incentivized U.S. companies to reinvest domestically, it also raised concerns about tax base erosion in other jurisdictions.
3. Implementing Anti-Base Erosion Measures: The TCJA introduced provisions like the Global Intangible Low-Taxed Income (GILTI) tax, designed to reduce incentives for U.S. companies to shift profits to low-tax jurisdictions. While GILTI intended to address base erosion, it didn’t align with later OECD global tax reform efforts, illustrating the tension between U.S. policy and multilateral coordination.

These policies spurred a broader discussion on fair taxation, with emerging economies and lower-income countries arguing that wealthy nations’ tax structures often allow profits to flow away from the regions that produce them. This disparity fueled UN-led calls for a more equitable global tax system because even the TCJA could not stop US MNEs from booking profit in low-tax jurisdictions.

2021 to Present: Biden Administration, OECD Coordination, and the UN’s Call for Global Tax Rules

Since 2021, the Biden administration has taken a more collaborative approach to global tax policy, working closely with the OECD and supporting the idea of a coordinated minimum tax rate. Key developments include:

1. Backing the OECD’s Global Minimum Tax (Pillar 2): The Biden administration supported the OECD’s minimum tax plan, which sets a 15% tax floor on corporate profits worldwide to discourage profit-shifting. This shift toward global alignment was a clear contrast to Trump’s more U.S.-centric approach.
2. Revisiting Corporate Tax Rates: While the Biden administration has proposed higher U.S. corporate tax rates, these changes have been incremental. The emphasis has been on fairer taxation domestically, aligning with the OECD’s approach and supporting the UN’s goal of limiting aggressive tax avoidance.

Looking Forward: Implications of a New Trump Administration on UN and OECD Tax Reforms

With the return of President Trump to the Oval House, both the OECD and the UN-led tax reforms may face a huge setback. Some potential impacts include:

1. Resistance to the OECD and UN Tax Agendas: Trump’s preference for U.S.-centric policies may lead to opposition to both the OECD’s minimum tax and UN-led global rules. He could push for tax strategies that prioritize U.S. competitiveness over multilateral coordination, creating friction with international tax bodies.
2. Reinstating Lower Corporate Tax Rates: Trump might focus on re-establishing lower corporate tax rates, returning to the 2017 TCJA framework. This could revive a race-to-the-bottom dynamic, with other countries possibly responding with competitive tax cuts, counteracting the OECD and UN’s goals for stability and equitable taxation.
3. Potential Impacts on Developing Economies: Should the U.S. step back from the OECD and UN frameworks, it could slow progress toward inclusive global tax reforms. For lower-income countries, the UN’s framework represents an opportunity to better capture revenue from multinationals. A new Trump administration, however, might prioritize bilateral agreements or unilateral tax provisions that bypass broader global norms, potentially diminishing these countries’ leverage.

Trump’s stance could challenge the UN’s momentum in pushing for a more balanced tax system. Developing countries may find it harder to secure a fair share of revenue from multinationals if the U.S. resists or undermines these frameworks.

Conclusion: The Future of Global Tax Policy and the U.S. Role in It

Trump’s 2017 tax reforms reshaped the global tax landscape, sparking debate on equitable taxation and influencing both the OECD’s and the UN’s paths toward fairer standards. While Biden’s administration has supported the OECD and engaged in multilateral discussions, a future Trump presidency could mean a return to prioritizing U.S. sovereignty over global alignment.

As the UN steps up as a global tax authority, the path forward is complex. With Trump potentially re-entering the picture, we may see heightened tension between U.S. policy and multilateral tax goals, especially on questions of fairness for developing economies. For businesses and policymakers alike, staying informed and adaptable will be crucial in a world where tax rules are in constant negotiation.

How do you see the role of the U.S. evolving in global tax reform? Feel free to share your thoughts below—let’s keep the conversation going.