23/04/25
New Trump Term Brings Big Changes On International Taxes And Digital Assets
The second Trump administration is proving more than just an extension of the first. Epitomised in the elevation of Elon Musk to key advisor and chainsaw wielding bureaucratic reformer, the new administration has embraced the tech sector ethos of ‘move fast and break things,’ which emphasises bold innovation and experimentation over caution. On critical issues such as global taxation and the regulation of digital assets, this assertive approach has been on full display.
Rejecting The OECD Pillar II Agreement
On international taxation, the Trump administration is steering US policy back toward national sovereignty and tax competitiveness. Central to this shift is the outright rejection of the OECD's global minimum tax framework, also known as Pillar II. This proposal, driven primarily by higher-tax nations, seeks to curb international tax competition, claiming it creates a harmful "race to the bottom" in global tax revenues. The OECD’s own data on corporate tax collection shows this fear is unfounded; instead, the rules would hamstring smaller and lower-tax jurisdictions to prevent any competitive financial threat to the global dominance of high-tax welfare states.
Immediately upon taking office, the Trump administration provided a forceful denunciation of Pillar II, claiming it “allows extraterritorial jurisdiction over American income,” and “limits our Nation’s ability to enact tax policies that serve the interests of American businesses and workers.”
It also clarified that “the Global Tax Deal has no force or effect in the United States,” though that is more a statement of reality than a policy change, as full compliance with Pillar II requires action by Congress, which they have not taken and certainly won’t under Trump. Rhetorically, though, this marks a significant shift from a Biden administration that promised US support despite its own inability to move the necessary legislation through Congress.
It’s worth noting that the US already maintains tax rates sufficient to meet the OECD’s minimum tax threshold of 15 per cent and has since before the Pillar II effort even began. At issue is the different methods by which the US and the OECD calculate income, impacting things like US treatment of research and development. In a few cases, US companies that spend heavily might meet requirements for the undertaxed profits rule (UTPR), a far-reaching extraterritorial tax regime that allows countries to tax foreign companies outside their jurisdiction that pay a sub-15 per cent tax burden in other jurisdictions.
The Trump administration is promising to retaliate against any country that attempts to levy a UTPR tax on US companies, something that it would be able to do without Congressional action. An Executive Order instructed the Trade Representative to “investigate whether any foreign country subjects United States citizens or corporations to discriminatory or extraterritorial taxes,” citing statutory authority that allows for the doubling of tax rates on citizens and corporations from jurisdictions where US taxpayers are subject to discriminatory taxes. Trump was urged during his first term by some members of Congress to use this tool in response to the ‘digital taxes’ pursued by some European nations. Legislation has also been introduced that requires such increases for jurisdictions that impose UTPR or similar taxes on US entities.
It's possible that the Trump administration may opt for an even tougher stance on the OECD. As proven with the WHO and UNHRC, the new administration is not afraid to withdraw from international organisations. In fact, it ordered a comprehensive review by the Secretary of State of all existing memberships and treaties to be delivered by August. Could this review uncover that the OECD’s consistent advocacy for higher taxes and bigger government is antithetical to US interests?
The Next Round Of Tax Reform
The US Congress is likely to take up tax policy again this year, as many of the changes made in 2017 during Trump’s first term are set to expire at the end of 2025. In addition to extending existing rates, the Trump administration is likely to push for other changes.
One change that he campaigned on is lowering the corporate tax rate to 15 per cent. However, Trump made the same push during his first term before accepting the agreement reached in Congress for a 21 per cent rate, while his other promises, such as no taxes on tips and social security payments, are impractical and domestically focused. In addition, the corporate tax rate does not face expiration, and so even a failure to pass new legislation will not see a return of the onerous 35 per cent rate.
A New Approach To Digital Assets
The Biden administration proved about as hostile to cryptocurrency and digital assets as one could be, short of imposing outright bans. It lawlessly targeted Tornado Cash, a decentralised privacy protocol, and pursued a novel legal theory that treated smart contracts like people. Its SEC, led by Chair Gary Gensler, engaged in regulation-by-enforcement, where regulators refused to engage in rulemaking or provide guidance for companies seeking compliance, but instead harassed market participants on legally flimsy grounds that were frequently rejected in court, wasting millions of industry and taxpayer dollars. Trump’s SEC, by contrast, has already dismissed ten such actions.
The Biden administration also abused the financial system to stymie innovation. It killed Facebook’s Libra stablecoin project, which sought to expand financial access through sound digital money backed by low-risk assets and cheap payments. According to ex-Meta executive David Marcus, and despite its meeting all regulatory hurdles, its demise “was 100 per cent a political kill—one that was executed through intimidation of captive banking institutions.” Simply put, US innovation was subjected to the whims of Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen, instead of market forces.
The misuse of the financial system to target digital assets was a recurring theme during the Biden administration. Custodia Bank CEO Caitlin Long, in response to David Marcus’ revelations about the treatment of Libra, promised to one day “tell the real story…and how the Fed lied to achieve Biden/Warren political aims,” in order to deny the crypto-serving bank equal access to the financial system.
More and more examples of debanking under the Biden administration are coming to light. Intimidating FDIC letters discouraged banks from engaging with crypto-related firms. Deposit caps were imposed on crypto companies by regulators without following proper regulatory procedure. Banks that served crypto clients were forced to shut down arbitrarily, owing to the fact that, as former Democratic Representative Barney Frank alleges, “regulators wanted to send a very strong anti-crypto message.”
The process of uncovering the full breadth of the debanking scandal, and enacting reforms to prevent such abuses going forward, is still underway. But the Trump administration is not waiting for this process to make its own drastic changes. He has promised to make the US the world’s crypto capital.
Right away, Trump moved to create a crypto task force within the SEC to recommend policies that both protect investors and foster innovation, while signaling possible reversals of crypto-related rules. Nevertheless, the US won’t come close to being considered the crypto capital of the world so long as ‘US persons’ are regularly excluded from new product offerings and lucrative ‘airdrops’ by companies terrified of being pursued under onerous securities requirements that predate even vacuum-tube enabled computers.
It's worth pointing out that it is unclear to what degree Trump understands or really cares about digital assets. His public comments, for instance, suggest at best a superficial understanding of the technology. Nevertheless, his administration is staffed almost exclusively with pro-crypto personnel.
One major initiative is the new US Strategic Bitcoin Reserve. While generating significant headlines, the actual substance is less than it seems. The reserve is to be funded with Bitcoin previously seized by the government. It is, in effect, a fancy promise to not sell such assets in the near term, which may or may not have any lasting power beyond the current administration.
Trump has nevertheless come far from his first-term declaration that he is “not a fan of Bitcoin and other Cryptocurrencies.” Indeed, he or someone close to him has even dabbled in the shadier world of meme coins, from which the legal and political ramifications will also take some time to develop. Legislators will at some point likely grapple with the ethical boundaries of lawmaker-promoted financial assets.
Perhaps the most impactful move to date is an executive order banning the establishment of a central bank digital currency (CBDC). Many consider CBDCs to represent a unique threat to privacy and financial rights, as government control of what would likely turn into a legal monopoly on dollar denominated digital currency would provide an irresistible opportunity for authorities to spy on personal financial activity, especially for CBDCs aimed at retail consumers. This is a stark contrast to the European Central Bank’s pursuit of a digital euro. As such, the coming clash of philosophies may mirror the international fights over corporate taxation.
How deep and lasting the new US approach to digital assets will prove to be is unclear. What is more certain is that Trump 2.0 offers a clear contrast, not just to his predecessor Joe Biden, but also to the first Trump administration. As such, the global community should be prepared for a bolder and more direct approach to issues related to both international taxation and digital finance.
Brian Garst
Brian Garst is the Vice President for the Center for Freedom and Prosperity, which works to promote tax competition, financial privacy and fiscal sovereignty.
