I Introduction

This newsletter provides key insights from the seminar "BEPS 2.0 × Trump 2.0 – Navigating the New Era of Tax Governance for Japanese Companies," co-hosted by Nishimura & Asahi, Brunswick Group, and KPMG Tax Corporation in Tokyo on March 14, 2025. The keynote speaker, Pascal Saint-Amans, former Director of the OECD Centre for Tax Policy and Administration (currently a partner at Brunswick Group and a professor of taxes at Lausanne University, Switzerland) delivered an insightful lecture on BEPS 2.0 × Trump 2.0, a topic at the forefront of today’s rapidly shifting international tax environment.

II Keynote Lecture: Pascal Saint-Amans on “BEPS 2.0 x Trump 2.0”

1. Introduction: the “Day One Executive Order”

On January 20, 2025, U.S. President Donald Trump issued a presidential action called “The Organization for Economic Co-operation and Development (OECD) Global Tax Deal (Global Tax Deal).” Saint-Amans shared his insights on its impact on international tax policy and future developments:

  • Not surprising, but expected: It was widely anticipated that the Republicans and the second Trump administration (Trump 2.0) would take retaliatory measures against the Under Taxed Profits Rule (UTPR) and Digital Services Taxes (DSTs).
  • No Immediate Trade War: Trade sanctions were not imposed from Day One, which will help to mitigate potential disruptions to both the U.S. and global economies.
  • Elevated Policy Priority: The inclusion of international tax issues in the Day One Executive Order signals that Trump 2.0 assigns greater importance to international tax policy than previously assumed.
  • Future Outlook: It remains too early to conclude whether Trump 2.0 will succeed in dismantling the OECD Global Tax Deal entirely.

2. BEPS 2.0 × Trump 2.0

Saint-Amans then analyzed the intersection of BEPS 2.0 and Trump 2.0, emphasizing the following key points:

  • Will Trump 2.0 Fully Withdraw from the Pillar 1 Deal? While the Trump administration has moved toward retaliatory measures against DSTs under Internal Revenue Code §891, this stance is not new. In his first term, the outcome of the Section 301 investigation sent a clear signal that the U.S. would take action against DSTs that could discriminate against U.S. businesses. However, unlike his immediate withdrawal from the Paris Agreement on climate change on his first day in office, Trump has set a 60-day review period for DSTs, indicating a degree of flexibility. In addition, Rebecca Burch, who comes from a Big Four tax firm and is highly knowledgeable about international tax negotiations, is expected to lead U.S. engagement in OECD tax discussions. It also is worth noting that if Pillar 1 negotiations collapse, it is indeed the U.S. that will face the worldwide spread of DSTs.
  • U.S. Withdrawal from the Pillar 2 Deal Is Not a Fundamental Shift: The U.S. never successfully implemented the GloBE (Global Anti-Base Erosion) rules domestically. Even under the Biden administration, the Build Back Better Act failed due to opposition from Senator Joe Manchin. As a result, announcement of the withdrawal by Trump 2.0 does not mark a substantive policy shift.
  • What would be the True Goal of Trump 2.0’s UTPR Retaliation? Typical U.S. tax incentives (e.g., R&D tax credits) are non-refundable, and reduce tax liability rather than increasing income for purposes of the GloBE rules. Consequently, U.S. MNEs would have a drastically lower effective tax rate in the U.S., making them subject to taxes under the UTPR in Europe, Japan, and elsewhere. If Trump 2.0’s primary goal is to shield the U.S. income of U.S. MNEs from taxation under the UTPR, a permanent UTPR Safe Harbor would suffice. This might be acceptable, at least to a certain extent, for UTPR jurisdictions, since the temporary UTPR Safe Harbor already has been adopted in the interpretation of the existing GloBE model rules. However, eliminating the UTPR entirely could encourage profit shifting from the U.S. to low-tax jurisdictions (e.g., the Cayman Islands, which has no domestic minimum top- up tax), which is less legitimate as a U.S. tax policy. Since the UTPR serves as the enforcement mechanism for Pillar 2, abolishing it could destabilize the entire GloBE framework, making it nearly unacceptable to the UTPR countries.
  • Challenges to Abolishing UTPR Completely: Unlike the establishment of a permanent safe harbor, abolishing the UTPR would require a fundamental overhaul of GloBE model rules, necessitating a new global political agreement, which is extremely unlikely. Moreover, the EU needs unanimous consent from all 27 member states to amend the directive mandating implementation of the UTPR, which is virtually impossible to obtain. Given these constraints, Pillar 2 is likely to survive under Trump 2.0, and thus it would be naive to conclude that Trump 2.0 will unravel the OECD Global Tax Deal immediately.

3. Message to Japanese Participants

Saint-Amans concluded his speech with an inspiring "Good Luck!" to encourage Japanese participants, reminding them that while international taxation is a field marked by uncertainty and complexity, it also offers an exciting and dynamic role for tax professionals.

  • Pillar 2 is Here to Stay: Japanese MNEs should be prepared. Although there will be a heavy compliance burden, Japanese MNEs will benefit from the level playing field that Pillar 2 guarantees.
  • Focus on “3T” (Tax, Trade, Trump): Management now needs to consider taxes, trade, and U.S. policy dynamics in a holistic manner when making business decisions.
  • Taxation is Not Just a Financial Issue: Tax policies increasingly affect corporate reputations. In particular, as the CbCR becomes publicly disclosed in the EU and Australia, tax disclosures become scrutinized not only from a tax compliance perspective, but also from a public relations and investor relations perspective, which can have implications for a company's reputational risk.