DONALD J Trump, currently the virtual owner of the Republican Party, having trumped the Democrats and its candidate Kamala Harris in the US Presidential election in 2024, has been formally anointed as the 47th President of the USA on the 20th January, 2025. But even before he formally took over the Presidency, Mr Trump and his latest bosom pal Elon Musk were flooding the social media with their tweets issued at odd hours of the day and night. So far, apart from the threat of tariffs on sundry countries, most of the actions of the new administration is to negate any traces of any progressive policies followed by the Democrat Biden's administration.

On the 1st day in office, Mr trump issued a flurry of executive orders- about one hundred of these. From the taxation point of view, particularly of those that have or will have international ramifications, we may note one that caught attention from the students and practitioners of international taxation and that was the following statement that was not much touted about during his campaign but what many predicted as inevitable consequences of the American exceptionalism. A few lines from his inaugural address are worth noting:

"(…)

From this day forward, our country will flourish and be respected again all over the world. We will be the envy of every nation, and we will not allow ourselves to be taken advantage of any longer. During every single day of the Trump administration, I will, very simply, put America first.

(…)

And our top priority will be to create a nation that is proud, prosperous, and free.

America will soon be greater, stronger, and far more exceptional than ever before." (Source:https://www.whitehouse.gov/remarks/2025/01/the-inaugural-address/)

American exceptionalism is something that the world has to put up with. It is not as if Mr. Trump is the sole proponent of American exceptionalism. Other Presidents including Barack Obama also believed or at least behaved in the same way. The Foreign Accounts Tax Compliance Act (FATCA) regulations that Mr. Obama had put in place had to be swallowed by all the countries although it was purely extra territorial.

But President Trump seems to be carrying American exceptionalism to a new level. We may recall that during the first Trump administration, the USA was a very reluctant participant and its representatives were most of the time putting spanner on the OECD's much vaunted global tax deal. In fact, in 2019, following the row that erupted over various nations imposing Digital services Taxes (DSTs) on various digital services provided by multinationals and most of the in-scope MNCs being American, for a time, Steven Mnuchin, then Treasury secretary in 2019, had withdrawn USA from the OECD-led project.

Subsequently, with the change in administration with Mr. Joe Biden as President and Ms. Janet Yellen as Treasury Secretary, the USA came back to the talks and the OECD finalised its two-pillar project. Although Pillar one was and still is in the limbo, pillar two got metamorphosed in a global minimum tax mimicking the American GILTI, which ironically was also a product of Mr. Donald Trump's Tax Cuts and Jobs Act, 2017. It is true that the Biden administration did try to bring the USA into the OECD's coordinated project but could not muster sufficient numbers in the House and floundered on the recalcitrance of some Democrats, in particular Senator Joe Manchin. In sum, although the Biden Administration was supportive of the OECD's work, the USA never embraced the global tax deals-neither MLI, nor pillar one, nor Pillar two. In part, it is the nature of the composition of the Houses where, generally speaking, none of the parties enjoys continuous majority and any international treaty is held up for ratification for years together.

This year though the Republican Party has the Trifecta whereunder the same party enjoys the Presidency, and the majority in the two houses. If all the lawmakers of a particular party temporarily enjoying this privilege agree amongst themselves, they can use this opportunity to implement significant reforms.

President Donald Trump however has used this opportunity to again stymie the OECD/G-20 effort to find an international tax deal. In fact, one of his very first act on day one of his presidency was to repudiate the OECD's works. To this effect he issued a Memorandum and considering the importance of the subject, it will be worthwhile to reproduce the same.

"The OECD Global Tax Deal supported under the prior administration not only allows extraterritorial jurisdiction over American income but also limits our Nation's ability to enact tax policies that serve the interests of American businesses and workers. Because of the Global Tax Deal and other discriminatory foreign tax practices, American companies may face retaliatory international tax regimes if the United States does not comply with foreign tax policy objectives. This memorandum recaptures our Nation's sovereignty and economic competitiveness by clarifying that the Global Tax Deal has no force or effect in the United States.

Section 1. Applicability of the Global Tax Deal.

The Secretary of the Treasury and the Permanent Representative of the United States to the OECD shall notify the OECD that any commitments made by the prior administration on behalf of the United States with respect to the Global Tax Deal have no force or effect within the United States absent an act by the Congress adopting the relevant provisions of the Global Tax Deal. The Secretary of the Treasury and the United States Trade Representative shall take all additional necessary steps within their authority to otherwise implement the findings of this memorandum.

Sec. 2. Options for Protection from Discriminatory and Extraterritorial Tax Measures.

The Secretary of the Treasury in consultation with the United States Trade Representative shall investigate whether any foreign countries are not in compliance with any tax treaty with the United States or have any tax rules in place, or are likely to put tax rules in place, that are extraterritorial or disproportionately affect American companies, and develop and present to the President, through the Assistant to the President for Economic Policy, a list of options for protective measures or other actions that the United States should adopt or take in response to such non-compliance or tax rules.

The Secretary of the Treasury shall deliver findings and recommendations to the President, through the Assistant to the President for Economic Policy, within 60 days.

Sec. 3. General Provisions.

(a) Nothing in this memorandum shall be construed to impair or otherwise affect:

(i) the authority granted by law to an executive department, agency, or its head; or

(ii) the functions of the Director of OMB relating to budgetary, administrative, or legislative proposals.

(b) This memorandum shall be implemented consistent with applicable law and subject to the availability of appropriations.

(c) This memorandum is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person."

Read carefully, the Memorandum not only takes the United States out of the so-called Global Minimum Tax that the OECD has been touting as its big achievement for the last few years, it also holds out a threat to other countries of suitable retaliatory action by the US of A should its multinationals are taxed by any such countries. We may recall that in 2019, the USA had initiated section 301 proceedings under its trade laws against countries imposing the so-called Digital Services Tax against France, the U.K and others. India was also put on the list because of the 2nd Equalisation levy of 2% introduced in 2020. At that time, it was agreed that punitive action will be kept in abeyance and that the levy will be withdrawn when a global agreement on Amount A will be reached. As it transpires, any global agreement on Amount A is far off in the horizon and Mr. Donald Trump is back as President of the USA and is threatening everyone else.

In a way, this is good for India. OECD has been able to hoodwink the world that its Pillar 2 will be beneficial for everyone including the developing countries. But the way, the Pillar 2 rules have been designed, it is clear that there is very little for India to gain from the said deal. In fact, commentators in India have been expecting the incorporation of the qualified domestic minimum top up tax (QDMT) to form part of the upcoming budget. Now, with this development, it is to be seen whether India goes in for the same to be incorporated as part of its Domestic Tax law. Apart from anything else, the rules that the OECD has proposed are extremely complex and sometimes beyond comprehension. So, one is not too disconcerted by the non-implementation of such a deal. Of course, one does not know the way of thinking of the current government and it may as well be adopted in India. One does not know.

But apart from the minimum tax, what is more disconcerting is the threat of the Trump administration to retaliate against any country that choses its sovereign right to tax multinationals, particularly of the American variety in a way that is not to the liking of the present dispensation that in any case is heavily dominated by the big-tech companies what with Elon Musk, Jeff Bezos, Sunder Pichai, Tim Cook and other tech luminaries gracing the inauguration of President Trump. Mr. Biden in his farewell address has warned about an "oligarchy" of the ultra-rich that is taking hold in the country and a "tech industry sector" that is undermining Americans' rights and the future of democracy.

(Source: https://a2news.com/english/rajoni-bota/bota/presidenti-joe-biden-i-drejtohet-vendit-ne-fjalimin-e-lamtumire-i1137925)

Should the rest of the world cave in, the international tax scenario would be dominated by these companies. And that is the irony because the genesis of the BEPS project itself that was in the works for more than a decade was because of the awareness created by media and civil society organisations about the tax avoidance practices of the American tech giants including Apple and Google.

As Tax Justice Network notes- In a presidential memorandum issued hours after taking office, President Trump signalled plans to turn back US tax policy to a pre-League of Nations standing - to a time when companies could only be taxed by the imperial power they came from, regardless of where they were making their money. Trump also ordered the US Treasury to prepare 'protective measures' against any countries exercising tax rules that the new US administration sees as exercising 'extraterritorial' or 'disproportionate' impact on US-headquartered multinationals.

In effect, this requires countries to cede their tax sovereignty over multinationals operating within their own borders - or face serious countermeasures.

In such circumstances, it will be futile to expect that the OECD will guarantee the tax sovereignty of nations and the work being done under the aegis of the United Nations may be the only legitimate way of doing so. But who knows what the current dispensation will do to the UN itself? As it is, President Trump is not a big fan of the United Nations and the very foundation of the world order so assiduously built after the Second world war may also come crashing.