Amid a wave of announcements, the most disruptive to the international order is arguably the president’s declaration that global taxation frameworks must be reformed. Specifically, he plans to double taxes on foreign nationals and companies that engage in discriminatory practices against U.S. businesses. This move comes as the OECD’s global tax agreement for multinational corporations—intended to establish a consistent framework—now appears defunct following the U.S. withdrawal. The shift is likely to accelerate the transformation of U.S.-EU relations from a collaborative alliance to a more transactional partnership.
For the UK, this raises pressing questions, particularly regarding the future of the Digital Services Tax (DST) amidst an increasingly aggressive U.S. stance. The potential financial implications are significant. The OECD’s Pillar One initiative was projected to generate an additional £2.8 billion in revenue by the end of this parliamentary term, a figure comparable to the DST’s contributions. Abandoning both measures at a time when the government is grappling with deficit reduction could prove particularly challenging. Moreover, the UK must consider whether it is economically resilient enough to risk a tax-related trade conflict with the U.S.
However, the UK may avoid becoming a central target, even under a Trump administration, as the U.S. is unlikely to pursue simultaneous tax and tariff disputes with all its allies. A proactive adjustment to UK tax policies may mitigate potential friction. Additionally, the trade balance between the UK and the U.S. is relatively even, offering limited incentives for the U.S. to single out the UK. Ireland, by contrast, is far more exposed. Irish Prime Minister Leo Varadkar has acknowledged the risk of losing €10bn (£8.35bn) in corporate tax revenue if just three U.S. multinationals are repatriated under hostile U.S. policies. With 10 multinationals contributing 60% of Ireland’s corporate tax receipts, Ireland is highly vulnerable, particularly as companies like Microsoft channel global and EU revenues through its tax structures.
The agenda for the U.S. administration is clear: prioritize “America First” and ensure U.S. companies pay taxes to the federal government before other jurisdictions. The underlying goal is to recapture tax revenues currently paid to foreign governments, bolstering American corporate tax receipts. This approach could facilitate broader tax cuts and help reduce the national deficit. The effectiveness of these policies remains to be seen, but the immediate impact is expected to drive demand for professionals in key areas, including:
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International Corporate Tax Accountants: Specializing in multinational tax structures and repatriation strategies.
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Corporate Tax Lawyers: Representing businesses in courts and navigating competing jurisdictional policies.
- Global Law Firms: Leveraging lobbying capabilities in Washington and Brussels to influence policy outcomes.
In the UK, tax recruitment activity was already forecast to be high in 2024, but the ripple effects of U.S. policy shifts could make it an even busier year. As lobbying intensifies, the focus may increasingly shift from accountants to lawyers, also.