Updates

The OECD digital taxation project consists of two pillars: first, the reallocation of corporate tax revenues to market jurisdictions, and second, the introduction of a global minimum tax. While progress on Pillar 1 has been stalled for some time, many EU countries and Switzerland have already fully or partially implemented Pillar 2. However, since President Trump took office, Pillar 2 also faces significant challenges. Trump has instructed the U.S. to withdraw from the OECD’s digital taxation project. His administration now has 60 days to prepare measures for the President to act against countries that impose discriminatory and extraterritorial taxes against the U.S. Concrete announcements are expected no earlier than the second half of April. U.S. measures are likely to target the removal of the UTPR under Pillar 2 and so-called digital service taxes introduced by other countries. It is unlikely that the global minimum tax will be completely dismantled. EU countries are expected to maintain it and pressure Switzerland to continue its implementation. However, the U.S. position could mean the end of Pillar 1.

International tax competition is likely to intensify in the coming years. The federal and cantonal governments should prepare for these developments and continue with plans to introduce new internationally accepted measures to remain competitive (e.g., QRTCs).

Contents
The OECD project on taxing the digital economy aims to increase the acceptance of international corporate taxation. It is part of the “OECD/G20 Inclusive Framework on BEPS” (hereinafter: IF), which includes over 140 countries. It is composed of two pillars. Pillar 1 involves reallocating the profits of around 200 of the world’s largest and most profitable companies from their headquarters to market jurisdictions. Pillar 2 entails a 15% global minimum tax on all companies with annual revenues of at least EUR 750 million. In October 2021, IF member states agreed on the policy parameters of both pillars. Since then, work has focused on the technical implementation. Pillar 1 is to be implemented through a multilateral agreement presented for signature and ratification. Pillar 2 is implemented through uniform model rules developed jointly but enacted individually by countries (common approach). In addition to the model rules, there are explanatory commentaries and regularly updated administrative guidance documents.

State

Implementation of Pillar 1 has not advanced beyond OECD-level work. Pillar 2 is much further along; the EU and Switzerland have already implemented the global minimum tax in whole or in part. However, the G20 project has long been facing major difficulties.

Most countries have not implemented the minimum tax. On 20 January 2025, U.S. President Trump announced that the U.S. would withdraw from the digital taxation project and take countermeasures, including new withholding taxes, against countries applying discriminatory and extraterritorial taxes against the U.S. (link to the decree and link to the America First Trade Policy). His administration has 60 days to prepare measures enabling the President to retaliate against countries imposing such taxes (e.g., UTPR or digital service taxes). President Trump also announced plans to reduce the federal corporate income tax rate to 15% for production activities. The U.S. also withdrew from the ongoing UN tax project.

It has long been apparent that G20 countries are engaged in intensifying tax competition to attract high-tech and highly profitable companies. Countries increasingly want to claim these profits entirely for themselves rather than distribute them fairly at a global level. They also resist restrictions on using effective tools such as attractive tax rates. With President Trump, the international battle over research and production locations of major corporations has become overt.

Outlook

The future of international corporate tax law is currently uncertain. President Trump’s announcements could significantly impact the OECD minimum tax and likely spell the end of Pillar 1. Concrete U.S. countermeasures are expected no earlier than the second half of April and may receive support from Congress. It remains unclear which foreign taxes the U.S. will consider discriminatory and extraterritorial, and what exact measures the Trump administration will adopt in relation to the OECD minimum tax. The consequences will also depend on whether the U.S. dismantles the minimum tax entirely or seeks special exemptions to enhance its competitiveness at the expense of (EU) countries maintaining the tax.

Regardless of U.S. developments, political and economic considerations suggest that EU member states will continue to uphold the minimum tax. Key factors include how the OECD responds to U.S. demands and how other major G20 countries like China and India react. There are also questions about the impact of U.S. tariff decisions and their effect on stock markets, which may prompt a more cautious U.S. approach and deter a complete dismantling of the minimum tax.

Trump’s announcement of lower taxes in the U.S. could revive international tax competition. However, it is highly uncertain where this tax cut ranks among Trump’s priorities. The expected revenue shortfall is substantial, posing a major challenge in light of U.S. debt and deficits. U.S. tax policy is primarily determined by Congress, where several senators are skeptical of further increasing the deficit. Given the narrow Republican majority, significant political obstacles could hinder such a tax package. Nonetheless, the corporate tax cut from 35% to 21% during Trump’s first term reportedly yielded positive economic results, which may motivate Trump to pursue further reductions.

Significant changes to the OECD minimum tax are expected in 2025. However, it is unlikely to disappear entirely. Based on statements from EU leaders and institutions, it is expected that the minimum tax will continue as a European project and that the EU will exert strong pressure on Switzerland to follow suit (link to EU Parliament).

Position

There is a risk that adjustments at the OECD level, driven by U.S. or other state pressures, could disadvantage Switzerland. As a successful small economy, Switzerland must strongly defend its interests during the upcoming changes to the OECD minimum tax framework. It must also prepare for contentious and potentially unfair disputes, as demonstrated by the U.S. tariff measures. It is unacceptable for minimum tax rules to be significantly tightened through administrative guidance or for major powers to receive exemptions.

Given the current uncertainty regarding the future of the OECD minimum tax, Switzerland must remain flexible and responsive to changing conditions to preserve its competitiveness. Tax competition is fiercer than ever, and federal and cantonal authorities cannot afford to stand aside.