Implementation of the OECD’s two-pillar solution, including the Global Minimum Tax, has been thrown into disarray following President Trump’s January 2025 memorandum declaring that “the Global Tax Deal has no force or effect in the United States.” The U.S.’s withdrawal from the Global Minimum Tax carries significant implications for global tax competition and multilateral tax cooperation.

In a new paper, Rifat Azam challenges the prevailing narrative under which the Global Minimum Tax should be lauded as a triumph of multilateral tax cooperation. Instead, Azam argues that the Global Minimum Tax represents a tactical maneuver within a fragmented international economic framework. 

The article examines the conflicting interests among Western states, highlighting the EU’s pursuit of strategic autonomy and the U.S.’s shifting policy priorities. Moreover, it explores the ways countries can employ to circumvent the Global Minimum Tax and continue engaging in new forms of tax competition.

The article begins by articulating the GloBE rules, with helpful examples for the application of the UTPR, IIR, and QDMTT. While negotiations were purportedly inclusive, Azam contends that GloBE unfolded within a world order dominated by Western hegemony – an outcome of political negotiation between the EU and the Biden administration. Azam argues that the Global Minimum Tax disproportionately harms developing countries which often rely on tax incentives to attract investment (e.g., R&D), and stimulate economic growth. Additionally, developing countries were largely excluded from the OECD’s negotiation processes, with many lacking the administrative resources to implement its outputs. This section could benefit from a more detailed discussion, and some nuanced distinctions would be useful. For example, distinguishing between the economic interests and capacities of large market economies, least developing countries, and small island states (which are often tax havens). After all, many developing countries are adversely affected by BEPS and have supported a Global Minimum Tax. Meanwhile, some developing countries engage in BEPS and create negative fiscal externalities for other countries, including developing ones. Even if the Global Minimum Tax was substantively negotiated between the U.S. and EU, is it uniformly detrimental to all developing countries (and, if so, why did so many countries agree to it)?

The article proceeds to outline the interests underlying intra-western tax competition. Azam writes that the Global Minimum Tax is the result of Europe’s selective refortification and its pursuit of autonomy. He identifies several points of contention between the U.S. and EU, with the primary conflicts surrounding the taxation of U.S.-based Big Tech which generate substantial revenues in Europe. While European countries have been advocating for more robust taxation of these firms, the U.S. has continued to be protective of its digital technology giants. Also, Azam highlights the tension between U.S.’s domestic international tax regime (GILTI and BEAT) and the Global Minimum Tax, describing Senate Republicans’ opposition to the latter.

The article then critiques the paradoxical effect of the Global Minimum Tax, which, instead of eliminating tax competition, merely redirects it into less transparent forms such as subsidies and refundable tax credits. Azam describes Pillar Two as a competitive tool for regulating the global digital economy, which he refers to as a “cartel of governments” – all benefiting from increased tax revenue. Nonetheless, most countries already have corporate income tax rates above 15%, so there remains an incentive to reduce corporate income tax rates. Thus, tax competition will continue but with a different “floor” and in new, less transparent domains. The GloBE rules do not limit all forms of competition, and Azam suggests that countries will utilize various tax credits (e.g., broad use of qualified refundable tax credits) and subsidies to engage in global tax competition. In addition, Azam cautions from the abuse of the QDMTT, in which QDMTT-compliant jurisdictions will not collect that revenue or collect it only on paper. In this context, the author may consider possible paths forward that could address these challenges. For example, what mechanisms could be developed to prevent tax competition in the wake of GloBE, and should these measures be multilateral?

In summary, the article makes several important scholarly contributions. It frames the narrative of the Global Minimum Tax as one defined by contrasting U.S. and European interests, rather than commendable multilateral cooperation. Furthermore, it underscores the paradox at the heart of Pillar Two: instead of reducing global tax competition, it may incentivize it. The article is especially timely given the crossroads in international tax cooperation and considering the U.S. proposal to extend key international tax provisions enacted under the TCJA.