Corporate Tax 2025

International Tax Policy in the Trump Era: A Turbulent Global Landscape

The main issue on the mind of many international tax practitioners at the time of writing (and I dare say for years to come) is Donald Trump and the impact he is having on the global tax landscape. As noted in the introduction to this excellent guide last year, it is hardly a novel development to find the progress of international tax reform at the mercy of US politics, but the immediate impact that the new US President has had is beyond even what many practitioners expected – whether through his withering statements on the OECD’s Pillar One and Pillar Two projects, his introduction of significant tariff regimes, or simply his approach to domestic US tax reform, there is no doubt that we are entering a period of dramatic change in the global tax landscape as a result of US influence.

And yet, as the pages of this guide show, there currently remains a great deal of stability in domestic corporate tax regimes, following trends long established and not yet knocked off course by the influence of Mr Trump.

This guide is divided by jurisdiction before being broken down further into the following sections – (1) types of business entities and their basic tax treatment, (2) key features of the tax regime applicable to incorporate businesses, (3) the division of the tax base between corporations and non-corporate businesses, (4) key features of the taxation of inbound investments, (5) key features of the taxation of non-local corporations, (6) key features of the taxation of foreign income of local corporations, (7) anti-avoidance, (8) audit cycles, and (9) BEPS. Although by no means exhaustive, I hope that these sections provide anyone looking to make an investment into an unfamiliar jurisdiction with sufficient insight into the corporate tax landscape in that jurisdiction and a flavour of the key issues that may be relevant for their business.

At the outset, it is worth setting out a few key themes or trends that are drawn out in the answers of the many practitioners who have contributed a section on their jurisdiction of practice.

Tax competition is alive and kicking

Against the backdrop of various OECD projects to clamp down on different forms of tax competition, and the EU looking to resolve its own conundrum (that it is not a fiscal unity while still being concerned that there is a level tax playing field amongst member states) tax competition nonetheless continues to thrive. Although some of this results in significant attention from the media, such as the introduction of tariffs in the United States, and the various counter-measures that those countries affected have taken in response, it is also playing out through quieter and less flashy methods, such as through the efficiency of a jurisdiction’s tax administration and the consistency or certainty in the application of its tax rules. Of course, with an increase in financial demands on governments (due to, for example, national defence obligations), the answer to the question as to whether tax administration budgets remain at their current levels and can continue to provide even their current service levels, or are instead one of the first budgetary casualties, remains to be seen – in the United States, plans are already afoot to reduce the IRS workforce by an estimated 20% this year.

Avoidance crackdown

Still reeling from dealing with COVID-19, the impact on the global economy of the war in Ukraine, and various efforts to restart their economies, the need for many jurisdictions to increase spending on national defence might be the last straw. In any event, tax is likely to play a major part in the success or failure of governments in juggling these various financial issues and obligations. However, as well as the possibility of introducing new taxes, governments are also looking to enforcement as another avenue worth exploring if they are to balance their budgets. For some, that means encouraging fast and early payment of taxes; for others, it involves an aggressive clampdown on evasion and avoidance behaviours. Either way, it is clear that if improved enforcement is to occur, tax administrations will need to devote further resources, whether through more work hours, or through new technological improvements, to the way they enforce and collect tax – something unlikely to be possible if government purse strings are tightened further. The approach that each jurisdiction takes to this thorny issue will be something to watch over the coming years.

Status of OECD reforms

Many jurisdictions have already implemented a version of the OECD’s Pillar Two reforms. The introduction of these rules represents the culmination of many years of international engagement at the OECD level and is a reflection of a gradual change in attitude towards tax planning/mitigation over that same period. Yet the impact of their introduction is potentially only just beginning to be felt by taxpayers. The complexity of the rules, the enormous compliance burden of carrying out the required calculations, the practical application of the rules to real-world scenarios, and the interaction of taxpayers with tax authorities on areas of uncertainty, look set to have a significant and long-term impact on the tax landscape for years to come.

Of course, all that is before the wild card thrown into the mix by the new Trump administration, which has expressly disavowed any commitments previously made by US governments with respect to the OECD reforms and has stated that such reforms have no force or effect in the United States in the absence of an Act of Congress. The OECD’s Pillar One project has been seen as dead in the water by many practitioners for some time now, long before the new Trump administration, but it is very much a question of “watch this space” to see what impact the US approach now also has on Pillar Two around the world.

Conclusion

Corporate taxation is not immune to the broad changes happening across the world in the political and economic arena. The next few years will prove a significant test to the trends and developments in this space, which have been progressing steadily over the last few years. Whether these trends will survive is anyone’s guess, but there will almost certainly be some element of reset or rebalancing in line with broader international political and economic changes.