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

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, in a move that has been welcomed in Ireland.

The decision reverses 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 $100 billion to foreign governments over the next decade, according to treasury estimates.

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“From Ireland’s perspective, the removal of section 899 from the US tax reform legislation is very welcome,” said William Fogarty, tax partner with the Maples Group in Dublin. “Those provisions could have negatively impacted Irish companies and investors doing business in or with America.”

“The quid-pro-quo, which appears to involve relaxation of the OECD Pillar 2 global minimum tax rules towards US groups is also welcome. Given the dominant role that US investment has in Ireland, the changes are likely to be beneficial in terms of promoting and sustaining US investment in Ireland.

Mr Bessent said on X that his agency had asked lawmakers to remove the so-called Section 899 provision in Mr 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 chairmen 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.

Mr 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.

Mazars tax partner Cormac Kelleher said the decision would now call into question “the overall effectiveness of Pillar 2 and if it is fit for purpose. It is challenging to apply a global minimum tax regime if as large a player as the US is out of scope”.

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.

Maples’ Mr Fogarty said a lot of work would need to be done to formalise the proposed arrangements, which could involve changes to EU rules implementing the global minimum tax and related changes to the Irish taxes code.

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. – Copyright The Financial Times Limited