Trump wins, world loses: US firms exempt from 15 pc global minimum tax

In a not-so-surprising move on January 6, more than 145 countries led by the Organisation for Economic Co-operation and Development (OECD) agreed to exempt US multinationals from 15 per cent global minimum tax (GMT) at its Paris meeting.

This is not the only triumph for US President Donald Trump — or another setback for a rule-based global order. Trump got the European Union to exempt US firms from its carbon tax (CBAM or Carbon Border Adjustment Mechanism); swung many one-sided trade deals (FTAs) by threatening reciprocal tariffs, and withdrew from climate mitigation commitments, including the India-headquartered International Solar Alliance (ISA) and 31 United Nations-related bodies (66 organisations in all).

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Last week, the US captured Venezuelan President Nicolás Maduro for oil (the claim of drug-running was dropped by its justice department soon afterwards) with European countries keeping silent.

How Trump took US out of GMT

The OECD, a group of 38 developed and developing countries, and the G20, have been trying to check corporate tax evasion and avoidance since their 2012 Base Erosion and Profit Shifting (BEPS) initiative. About 100-odd other countries, including India, are signatories to this initiative.

Multinationals do this by shifting revenue and profit to tax havens (zero or near-zero jurisdictions). It was a decade later in 2021, that Trump’s predecessor Joe Biden set the GMT as the BEPS’s Pillar Two ("an aspirational goal"). It applies to firms with annual revenue of over 750 million euros.

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The other BEPS goal, Pillar One, is to reallocate taxing rights on corporate profits (over 25 per cent of the residual profit) to the countries where they do actual business.

Days after assuming his second term in January 2025, Trump withdrew from the GMT commitment and threatened a “retaliatory tax” if anyone dared. He rolled back the threat in June the same year when the G7 countries — the most powerful group in the world and part of both the OECD and G20 — assured that US and UK firms would be exempted.

Interestingly, the US is a core member of all of these organisations (G7, G20 and OECD).

Reuters reported on January 6 that the OECD countries not only agreed to exempt the US multinationals, recognising the US’s 12.6 per cent minimum tax on foreign profits (GILTI or Global Intangible Low-Taxed Income tax introduced by Trump in 2017), but also agreed to simplify compliance and offered exemptions for certain tax incentives — diluting the GMT.

Scott Bessent, the US treasury secretary, hailed this as “a historic victory in preserving US sovereignty and protecting American workers and businesses from extraterritorial overreach.”

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Interestingly, the OECD’s current head, Mathias Cormann, a right-wing former Australian finance minister, was first elected to the office in 2021 with Trump’s help and reappointed for another five years in July last year, when the US president was already in his second term.

Revenue loss from corporate tax evasion

Although the OECD claims more than 65 countries, including the UK, have begun implementing the GMT and hope for significant gains, the actual benefit will be known later.

India is a signatory to the GMT, but it has not taken the needed legislative move to implement it. It is unlikely to opt for the GMT either. Soon after Trump withdrew from its commitment in January last year, India started re-evaluating the GMT’s effectiveness and has maintained silence since then. Even otherwise, it has moved away, reducing the base corporate tax to 15-22 per cent in 2019, lower than the 30 per cent base rate for personal income tax.

In 2024, Chief Economic Advisor Anantha V Nageswaran warned that taxing the rich will lead to capital flight. Without GMT, countries are losing massive revenue.

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The Tax Justice Network (TJN), a global body fighting against such tax evasion and avoidance, said in its November 2025 report that over USD 475 billion was lost in revenue during 2016-2021. Most of it was by the US (USD 158.5 billion), followed by France 27.3 billion euros (USD 32.3 billion), Germany 25.7 billion euros (USD 30.3 billion), India Rs 1.8 lakh crore (USD 24.4 billion), the UK 10.8 billion pounds (USD 14.8 billion), etc.

The US firms have been resisting the GMT; they even sought a gag on country-by-country (CbCR) reporting/disclosures — the first step to detect tax evasion and avoidance.

Not all corporate tax evasions are illegal; rather most are tax avoidance through legal means, as global tax laws are designed to assist such activities. This will be clear soon.

Tax havens, which don’t do real business and charge zero or near-zero tax for parking income and wealth, are legal entities. Most tax havens are run and controlled by the OECD members, with the UK at the centre of it. TJN tracks 70 of those tax havens.

Another is too-low corporation tax regime across the world, which the GMT is trying to address.

Corporation tax goes downhill

Two graphs below show how corporate tax has fallen.

In the US, it went progressively down from 52 per cent in the 1960s to 21 per cent in 2017, with the promise of tax cuts paying for themselves (no revenue loss), higher investment and jobs. Trump, who brought it down from 35 per cent to 21 per cent in 2017, promised his billionaire supporters in 2024 to bring it further down to 15 per cent.

The effective corporate tax is much lower, falling from 37.8 per cent in the 1960s to 12.8 per cent in 2018.

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In the OECD countries, of which the US is a member, the average in 2025 had fallen to 24 per cent — from 32 per cent in 2000.

In India, higher the profits lower the tax

As pointed out earlier, India lowered the base corporation tax to 15-22 per cent in 2019.

But that is one part. The other is skewed incentive structures that end up reducing the “effective” tax rate for companies making higher profits. Companies declaring over Rs 500 crore profit-before-tax (PBT) pay the least effective at 19.8 per cent. Those declaring the least, Rs 0-1 crore PBT, pay the most at 24.5 per cent (maximum). This is the normal trend for decades, not an aberration.

The neoliberal grand design

To understand why corporations get governments to lower taxes, despite making higher profits and sucking up income and wealth, a brief background of the neoliberal economics the World Bank and International Monetary Fund (IMF) have pushed since the 1980s — when countries, including India, seek bailouts from them — is needed.

Before that, here is what the World Inequality Report of 2026 shows: the world’s top one per cent have 20 per cent income and 37 per cent wealth shares, while the bottom 50 per cent have eight per cent income and two per cent wealth shares.

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The neoliberal, or radical right economic thinking, gained the upper hand after the world went through a massive economic turmoil in the 1970s – multiple oil crises and high unemployment rates leading to stagflation; growth slowed down; governments were strapped for resources to boost growth. They pushed supply-side solutions — unlike the Keynesian demand-side push to take the US out of the Great Recession of 1929.

Led by Nobel winners in Economics — Friedrich Hayek (1974), Milton Friedman (1976), James Buchanan (1986) and others — the neoliberals pushed money supply (monetarism or low interest regime) as a key to growth and advanced corporate interests.

Starting with the 1980s, the World Bank and IMF imposed it on countries all over the world when they went for bailouts; India did the same in 1991 (forex crisis).

Several familiar concepts came along: privatisation of public assets, small state or fiscal austerity (or discipline), corporate tax cuts, capital market liberalisation, market-based pricing, and global free trade, among others.

The “trickle-down” theory was also part of the new economic concept that argued that wealth created at the top trickles down and reducing taxes on the rich (corporates and individuals) benefits the non-rich. Trump used these arguments to cut corporate tax in 2017. The US Congress review, published in May 2019, showed it failed to boost investment and wages or create fresh jobs. The same was the case with his predecessor Ronald Reagan’s 1981 corporate tax cut, too.

Wealth rhetoric, fiscal cost

Despite this report hitting the headlines, India followed suit and cut corporate tax in September 2019. Like Trump, Prime Minister Narendra Modi had foregrounded it by asking the people to respect “wealth creators” in his national address from the Red Fort on August 15, 2019. He had argued that “greater wealth creation will lead to greater distribution and help in the welfare of poor people”.

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In 2020, he repeated, “Only when wealth is created, wealth will be distributed.” In 2021, Union Finance Minister Nirmala Sitharaman went a step ahead and warned in the Parliament that “unless wealth creators create wealth”, there would be nothing to redistribute among the poor.

As the Reserve Bank of India's (RBI) annual report of 2019-20 said, this move also bombed like the US’s. The RBI said, “The corporate tax cut of September 2019 has been utilised in debt servicing, build-up of cash balances and other current assets rather than restarting the capex cycle.” The cut has considerably reduced revenue, too.

Trickle-down under scrutiny

Curiously, in 2017, the Wharton School published a study on the “trickle-down” theory, tracing its origin to American humourist Will Rogers’s 1932 column in which he made fun of an engineer’s understanding of water trickling down from the top to say that money trickles up, not down and described the theory as “the great hobgoblin of our time”.

Trump’s top advisor, who guided his 2017 corporate tax cut, is none other than economist Arthur Laffer of the famous “Laffer Curve”. He had advised Reagan, too. A neoliberal champion of “trickle-down” theory (supply-side batter), Laffer was honoured by Trump with America's highest civilian award, the Presidential Medal of Freedom in 2019, during which Trump described him as “the father of supply-side economics”.

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It is a different matter that Joseph Stiglitz, who won the Nobel in Economics in 2001, often dismisses neoliberalism as “a political agenda” which was “never supported by any economic theory” nor by historical evidence.

Paul Krugman (Nobel in Economics, 2008) calls neoliberalism a “zombie idea”, “ideas that should have been killed by contrary evidence, but instead keep shambling along, eating people's brains”.