US Senate Excises the OBBBA’s ‘Revenge Tax’

If you have been trying to follow the twists and turns of American tax legislation over the last week, you may be feeling a bit whiplashed—and not just because of the Senate’s (the upper house of America’s Congress) parade of amendments to the “One Big, Beautiful Bill Act” (OBBBA), which squeaked through the Senate Tuesday after Vice President JD Vance broke a 50-50 tie.^[i] Last Thursday, Treasury Secretary Scott Bessent asked Congress to remove the OBBBA’s Section 899, saying a new global agreement on corporation taxes negated the need for a potential revenge tax on nations singling out US Tech firms for special taxation.^[ii] But just one day later, President Donald Trump walked away from trade talks with Canada, citing that nation’s digital services tax (DST, a levy on certain business revenue earned from engaging with online users).^[iii] That tax then died Sunday.^[iv] So what is going on, and why was the digital services duty even still on the table after Thursday’s agreement? We have you covered.

For background, in 2021 the Organisation for Economic Cooperation and Development (OECD, a supranational organisation) brokered a deal to install a global minimum corporation tax rate, with the support of former President Joe Biden’s administration. Based on our review of financial publications, many countries wished to crack down on multinational companies seeking tax havens (e.g., Ireland), so the Group of Seven (G7) nations agreed on a global minimum tax rate of at least 15%—regardless of the multinationals’ headquarters location.^[v] This agreement included another levy on the largest multinationals, forcing them to pay taxes to countries based on where the goods or services were sold (regardless of their physical presence in that country).^[vi]

These tax measures affected America most because of its Tech giants, and nearly 140 countries supported the deal.^[vii] However, new taxes fall under the realm of national legislatures, and America’s Congress never ratified the agreement. Hence, since the country with the most firms affected by the tax wasn’t adhering to tax framework, it wasn’t effective globally. Still, some nations pushed forward with DSTs, a bespoke solution to get what they viewed as their fair share of economic activity taking place within their borders. The UK, France and Switzerland have implemented them, and Canada recently advanced one as well—which was on the verge of taking effect.^[viii]

Fast forward to 2025, and the Trump administration sought to address unfair levies, including the OECD’s “undertaxed profits” rule and DSTs. Enter Section 899, which financial coverage we review described as a revenge tax on non-US corporations and investors from nations imposing unfair duties on US multinationals. We read analyses arguing the OBBBA’s revenge tax would discourage investment in the US and worsen already tense trade relations.

But in our view, Section 899 wasn’t as draconian as advertised. It didn’t immediately create new taxes. It just created the power for the Executive Branch to do so, which smelled like a negotiating tactic to us.^[ix] Now it seems the mere threat worked, as Bessent announced an agreement exempting US-based companies from the 15% minimum corporation tax rate (contingent on Congress removing the revenge tax).^[x] He recommended, and the Senate did, strike Section 899 from the bill.^[xi] Whilst this is a positive reducing tax uncertainty, in our view, it doesn’t fix all the Trump administration’s gripes. The G7 agreement applied to global minimum taxes. Single-country DSTs remain.

Well, except Canada. It was set to start collecting DST on 30 June, retroactive to January 2022. But that prompted the Trump administration’s walking away from Canadian trade talks on Friday.^[xii] Lo and behold, Canadian Prime Minister Mark Carney U-turned on Sunday, cancelling the DST, which apparently has jumpstarted those trade talks anew.

From an investment perspective, we didn’t think Section 899 was some huge, fundamental negative, but it appeared to weigh on sentiment and created uncertainty. With it now off the table, investors can move on, in our view. We think this includes UK investors, who theoretically could have faced a potential new tax on US investments if Section 899 were used. DSTs remain a bee in the Trump administration’s bonnet and still influence trade talks—which we saw firsthand happened with Canada at the weekend. But not every trade negotiation where DST was a factor went to the brink. Digital services levies were part of trade talks with the UK, and a final agreement on whether and how Britain will amend its tax is still pending, but it didn’t prevent a deal with the US on other things. As for the broader implications of the G7 agreement, we think it helps bring resolution to an issue preoccupying investors since 2021 based on our financial commentary coverage. To us, this issue was slow-moving and had long since faded into stock markets’ structural backdrop. We now have more clarity on the global corporation tax landscape.

For investors, we think it is worth recognising policy uncertainty—whether related to taxes or the shifting sands of tariff talks—has been and still is a headwind this year. We don’t dismiss the economic implications or threat to global economic growth, particularly from ongoing tariff uncertainty—which the Canada episode is emblematic of. But markets also don’t wait for everything to be resolved, according to our research. They price in what looks probable in the moment and move on. We suggest investors also refrain from waiting for tax finality, as doing so may end up being a fruitless endeavour, in our view.