Australians investing in the United States will be spared from a tax of up to 15 per cent that the Trump administration was threatening to impose as “revenge” on countries that tax its tech giants.
US Treasury Secretary Scott Bessent said he would ask that the tax be taken out of Mr Trump’s “big, beautiful bill” after he secured an exemption from multinational tax rules.
Treasurer Jim Chalmers, who had lobbied Mr Bessent about the tax earlier this week, said the decision was “a really welcome one for Australians”.
“I would like to thank the treasury secretary again for his time this week, where I was able to represent and raise those concerns with him directly,” he said.
“In that meeting, he said he was progressing what he could to try and resolve these issues and we’re really pleased to see some of that progress.”
Government sources say Australia was not the main target of the tax, which was motivated chiefly by grievances with Europe resolved in G7 talks.
But the legislation, which targeted countries with “discriminatory” policies and specifically taxes on “digital services”, was likely to capture Australia’s proposed tax on social media platforms, which is to apply to platforms that fail to pay for news.
US Trade Representative Jamieson Greer complained about that policy in a G7 meeting with Prime Minister Anthony Albanese last week.
The 15 per cent “revenge” tax would have applied to any Australian investors in the United States, with major implications for Australian super funds.
“We do not want to see our investors and our funds unfairly treated or disadvantaged,” Mr Chalmers had said earlier this week.
Multinational tax gripe
The Trump administration has a staunch objection to the global multinational tax agreement known as “pillar two”, which had been signed by the Biden administration.
Pillar two, which involves 140 countries, seeks to impose a worldwide minimum tax of 15 per cent on multinational companies, regardless of where they are headquartered.
In January, Mr Trump signed an executive order withdrawing the US from pillar two and a second order effectively threatening to use US tax law to retaliate against countries that sought to impose the minimum tax on American companies.
Mr Bessent now says he has struck a G7 agreement to instead recognise the US’s own minimum tax regime on US investments in foreign companies (“GILTI”), which is between 10.5 per cent and 13.125 per cent.
In exchange, Mr Bessent said the US would no longer seek to impose retaliatory taxes. The move erodes the consistency of pillar two by carving out the US, but appears to have staved off the threat of an all-out American attack on the multinational framework.
“I want to thank my G7 counterparts for their partnership and collaboration towards achieving this historic outcome,” he said, adding he had asked the US Senate and House to remove the revenge taxes from the bill.
“This understanding with our G7 partners provides greater certainty and stability for the global economy.”
Rachel Reeves, the UK’s Chancellor of the Exchequer, said the “important action” would “ensure a level playing field on tax”.
Mr Chalmers said Australia would “consider the details” but would “continue to engage constructively … on international tax rules that are fair and ensure multinationals pay their fair share in Australia”.
Further opportunities for revenge
Despite the reprieve on the digital revenge tax, Mr Bessent left the door open to the continued use of US tax policy to threaten countries whose laws the US dislikes.
“The Trump administration remains vigilant against all discriminatory and extraterritorial foreign taxes applied against Americans,” he said.
“We will defend our tax sovereignty and resist efforts to create an unlevel playing field for our citizens and companies.”
Mr Trump on Thursday threatened Spain with higher tariffs if it failed to increase defence spending in line with other NATO countries, in a move that could set a precedent for similar pressure on Australia if it does not lift its own spending.
Anthony Albanese declined to comment on the development but affirmed Australia would make its own defence spending decisions.
“I’m not going to comment on things between Spain and the United States. What my job is, is to look after Australia’s national interest, that includes our defence and security interests and that’s precisely what we are doing,” he told reporters on Friday.