US President Donald Trump in an executive order soon after being sworn in has pulled the US out of the OECD’s global tax deal that aims to discourage cross border tax avoidance by multinational firms. With this action, the US has put the tax deal in suspended animation but the impact on India is seen to be minimal. “The OECD Global Tax Deal supported under the prior administration not only allows extraterritorial jurisdiction over American income but also limits our Nation’s ability to enact tax policies that serve the interests of American businesses and workers,” said the Presidential memorandum, signed by Trump on January 20 soon after being sworn in. “Because of the Global Tax Deal and other discriminatory foreign tax practices, American companies may face retaliatory international tax regimes if the United States does not comply with foreign tax policy objectives,” it noted, adding that the memorandum recaptures the US’s sovereignty and economic competitiveness by clarifying that “the Global Tax Deal has no force or effect in the United States”. He has also directed the US Trade Secretary to prepare a list of options for protective measures or other actions that the United States should adopt or take in response to non-compliance of tax treaties and rules by countries that have or plan to levy a disproportionately high tax on American companies. Over 140 countries have signed the OECD’s global tax deal that aims to tackle tax avoidance by large multinational companies, through two pillars of taxation. Pillar 1 aimed to reallocate the residual profits of large multinationals from their home countries to jurisdictions where they generate revenue, and Pillar 2 establishes a 15% global minimum corporate tax. Experts note that the move by the US, which comes as no surprise as Trump and the Republicans had previously made their stance clear, will have a massive impact on the tax deal. Rakesh Nangia , Managing Partner, Nangia & Co said the impact of the US pulling out of the global tax deal would have monumental impact on the global tax landscape, especially for countries/jurisdictions who have already adopted/formulated rules in their domestic law for implementing Global anti-Base Erosion Model or GloBE rules (Pillar 2). “Around 50 jurisdictions have already or have made significant strides towards adoption of GloBE rules. These jurisdictions will have to now undertake a course correction to adjust to the new realities,” he said. India, on the other hand, have always adopted a ‘wait and watch’ policy on adoption of GloBE rules and has yet to introduce any substantial legislative change in this direction, he noted. Companies were infact hoping that the Union Budget 2025-26 would clarify India’s stance on the Pillar 2 tax rules. In the Union Budget 2024, India had abolished the 2% equalisation levy (which, being a unilateral action, was a bone of contention for the US), Nangia noted, adding that thus, the US pulling out of the global tax deal would not have much impact to India purely from a tax collection standpoint. Än SBI Ecowrap report said that it expects that US may negotiate favourable tax treatment for US business operating in India thus impacting the revenue of the Centre.