A global minimum tax of 15% was introduced for large multi-national enterprises on 1st January, with almost no media fanfare. At the time of writing, around 55 countries have implemented this, including the UK and the EU bloc.
USA has not. Should we be surprised? No.
Below are some examples of the USA going against international tax norms.
1. USA taxes its citizens rather than those who are resident in the USA. This means that if you were born in the US but have lived in the UK for your entire life, USA’s Inland Revenue Service will still – potentially – want a chunk of your income. The only other country in the world to attempt to do this (badly*) is Eritrea.
2. Double Tax Treaties between countries override domestic law in (almost) every circumstance. They must have this status to allow for proper functioning of the treaty. The US, uniquely in international tax, in Internal Revenue Code §7852(d) effectively gave itself the right under their domestic law to override a treaty.
3. As far as I’m aware, all OECD countries use the OECD Model Tax Treaty as the basis for their treaties. Developing countries will generally use the UN Model Tax Treaty. About 90% of the world’s treaties are based on these two models. However, the US again decides to be different, and bases its treaties on the US Model Tax Treaty.
4. The US implemented FATCA in 2010, which essentially placed a massive compliance burden on any financial institution in the world that serves US citizens. It forces them to report detailed information on their US citizen account holders or have account holders face penal measures. Arguably, only the US with its massive economic and political strength could have implemented such a measure. In 2014 the OECD implemented the Common Reporting Standard (“CRS”), which allows for information on taxpayers to flow between signatories, with over 120 jurisdictions who have now signed. The US has never been a signatory to the CRS.
5. Double Tax Treaties often contain words or phrases which need interpreting. As an example, in the case of Macklin V HMRC (2015), the word ‘established’ in a Double Tax Treaty in regards to a pension fund needed to be clarified. Rules on treaty interpretation are found in the Vienna Convention on the Law of Treaties, coming into force in 1980. There are now 116 jurisdictions who are signatories. USA has never become a party to the convention.
6. The Multi-Lateral Instrument (“MLI”) allowed for some the recommendations of the OECD’s Base Erosion and Profit Shifting action points to be implemented into tax treaties without needing to renegotiate the entire treaty. It’s why if you search for many tax treaties you’ll find what appear to be two versions; the original treaty and the treaty containing the changes made by the MLI (e.g search UK/France double tax treaty). At the time of writing, 102 states have signed this. Guess what? The US has never signed up for the MLI.
