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UN tax deal may replace OECD framework after Trump executive order

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Negotiations at the United Nations began last week in New York over a global tax framework, and those talks may gain new impetus after President Donald Trump signed an executive order rejecting the two-pillar framework that the Biden administration had been negotiating with the Organization for Economic Cooperation and Development.

On Inauguration Day, Trump signed an executive order saying, “The Secretary of the Treasury and the Permanent Representative of the United States to the OECD shall notify the OECD that any commitments made by the prior administration on behalf of the United States with respect to the Global Tax Deal have no force or effect within the United States absent an act by the Congress adopting the relevant provisions of the Global Tax Deal.” 

The U.S. has not yet ratified the OECD/G20 Inclusive Framework on tax base erosion and profit-shifting framework, or BEPS for short, due to opposition from Republican lawmakers. But Trump’s repudiation of the global tax framework on his first day in office was a striking move for some observers.

“I was not so much surprised by this kind of policy direction, but just the timing,” said Zorka Milin, policy director of the FACT (Financial Accountability and Corporate Transparency) Coalition, a  nonpartisan alliance of over 100 state, national and international organizations. “I don’t think any of us who follow international tax expected this to be a day one priority issue, so that came as a surprise.” 

She sees a risk in the gains made on a global tax agreement. “In addition to all the trade wars, if we’re going to have a tax war, which is what they want this order threatens, that would not be in anyone’s interest,” said Milin.

Trump’s executive order threatens punitive action against other countries that are implementing parts of the OECD plan such as the Under-Taxed Profits Rule and the top-up tax, or the digital services taxes that countries like France and Canada have levied on multinational tech giants. 

It says, “The Secretary of the Treasury in consultation with the United States Trade Representative shall investigate whether any foreign countries are not in compliance with any tax treaty with the United States or have any tax rules in place, or are likely to put tax rules in place, that are extraterritorial or disproportionately affect American companies, and develop and present to the President, through the Assistant to the President for Economic Policy, a list of options for protective measures or other actions that the United States should adopt or take in response to such non-compliance or tax rules.  The Secretary of the Treasury shall deliver findings and recommendations to the President, through the Assistant to the President for Economic Policy, within 60 days.”

The Trump administration’s stance toward the OECD framework on global minimum taxes and country-by-country reporting could shift the action over to the United Nations now, where negotiations are underway on the UN Framework Convention on International Tax Cooperation. The Biden administration wasn’t able to get the OECD framework passed in Congress despite former Treasury Secretary Janet Yellen’s support for the effort. 

“It doesn’t change anything, because everyone knew that the Biden administration couldn’t get these things through, but in some ways, it just clarifies that they’re not going to apply in the U.S.,” said Alex Cobham, chief executive of the Tax Justice Network, a U.K. advocacy group concerned about tax avoidance. “But I think it’s the other piece of the memorandum that’s more significant. It’s the threat to go after other countries that are introducing elements of the OECD proposals, or indeed other types of tax incentive responses to the OECD’s failure, like digital services taxes. That takes things to a different level, and there’s an interesting possibility that it might backfire. What it won’t do is show countries, perhaps particularly in the European Union, that there’s no hope for getting any improvements on what’s already quite a weak OECD proposal, and instead push them into the United Nations process where something more significant could be achieved, which is exactly what I think the Trump administration would want to avoid. They may have given it rather a big push.”

Bargaining power

The U.S. may lose some of its bargaining power in the UN negotiations. “The U.S. effectively has a veto of the OECD, and that’s why the last negotiations were so difficult,” said Cobham. “The first Trump administration couldn’t get to a deal within the two years. So then in came the Biden administration, and completely flipped and put their own proposal in instead, and really added to the approach on the second pillar. We’re now back to a Trump administration, and both of those pillars really look frozen. So that’s the degree of control the U.S. has had. In the United Nations, most decisions are made by consensus. But where there isn’t consensus, it will go either to a simple majority or perhaps a supermajority of two-thirds of countries. That’s still to be determined for this negotiation of the convention. And what that means is, unless the U.S. can bring lots of countries with it, it won’t be able to block individual items, or indeed the convention as a whole. So you might see the U.S. not withdrawing, but kind of staying at the table in order to be somewhat obstructive. But it won’t actually be able to stop anything. And in the end, if a significant number of countries sign the convention, it will become effective for U.S. multinationals in other countries, even if the U.S. stays outside.”

The UN tax negotiations have not been receiving as much attention as the OECD’s Pillar One and Pillar Two framework, but the move could shift momentum toward the UN. 

“We need to have a multilateral agreement on tax issues because these are global problems, and the solution also has to be global,” said Milin. “I think that the OECD has done a lot of good work over the years and made a lot of progress, and the agreement was supported by something like 140 countries. It’s a big achievement, and maybe the UN can build on that achievement. But whether we’re talking about the OECD or the UN, I think it is unfortunate that the U.S. as a major international economic actor wouldn’t be at the table in those discussions. To be clear, I don’t expect that to happen necessarily, because if we read and parse carefully the text of that order, it’s not that the U.S. is withdrawing from their membership in the OECD. They will stay at the table, and I suspect try to gain additional leverage. I don’t think that this is the end of the story for the OECD process. I think it’s something that we’ll have to continue to watch to see how it evolves. If certain provisions of the previous agreement have to be reopened, that will be interesting to see, but I don’t think it will just be thrown out. I’m not even sure that that’s the policy goal of the Trump administration.”

DST impact

Canada’s digital services tax could pose a problem for the U.S., no matter what happens at the OECD or the UN. “There will be a test case very soon with Canada’s DST,” said Cobham. “Will Canada accept the tariffs, or whatever is going to be imposed? We’ll see that by the end of March. I think we’ll see the proposals come forward. Will Canada fold and give up their DST, or will they fight? That will be interesting to see, but it’s different when it’s one country. If we have 100 countries signing the UN convention, I think there will be a commitment to play together, to pass that into law collectively, perhaps to face collective punishment, but without the same kind of ability to pick off individual countries. I think we will see a move, almost because the U.S. multinationals will move first. In 2017 and 2018, it only took a few countries to start the process of introducing DSTs, and the big tech multinationals in the U.S. forced the administration into negotiations again at the OECD. Once it becomes clear that the UN convention could go much further than that, I think the U.S. Treasury will be hearing very clearly that they need to be full participants in the negotiations, even if that’s largely trying to block it. That’s going to be difficult, because you need a significant minority, at least, to be able to block at the UN.”

GILTI vs. UTPR

The upcoming negotiations in Congress over the extension of the Tax Cuts and Jobs Act of 2017 may also play a role. The TCJA includes some international tax provisions, such as Global Intangible Low-Taxed Income, or GILTI for short, and Foreign-Derived Intangible Income, or FDII. Similarly, the Biden administration’s version of a global minimum tax in the Inflation Reduction Act of 2022, known as the corporate alternative minimum tax, mainly applies to companies earning over $1 billion and differs markedly from Pillar Two of the OECD framework. 

Trump’s executive order could be one way for the U.S. to regain leverage in the OECD process.

“Maybe they think they can get a better deal than what was negotiated under the previous administration,” said Milin. “That’s how I read the order, especially when we think about the context and the history here. The process was initiated under the first Trump administration, actually. It goes back to the days of [former Treasury] Secretary [Steven] Mnuchin and some of the policy ideas that were included in the 2017 Republican tax bill around the Global Intangible Low-Taxed Income. The U.S. was the first to introduce a tax like that, and the OECD was a forum where that policy idea could go global. I think that this has actually been a policy win for Republicans, even though it’s strange that they don’t see it that way. What is unfortunate is the order seems to be targeting — but It’s not explicit — an aspect of the international tax agreement that is called Under-Taxed Profits Rule, which is something that was included in order to deal with companies from nonimplementing countries, in particular China, at the insistence of U.S. negotiators. If they’re successful in undermining UTPR, that’s a gift to China, and I don’t think that’s what they would want.”

In contrast, Trump’s new executive order authorizes the Treasury Secretary to retaliate against other countries that seek to impose taxes on U.S. multinational companies.

“If we take the order on its face, the results would be that the U.S. would be imposing these punitive, retaliatory taxes on some of our major trade partners and political allies in Europe, Canada, Australia, Japan, while on the other hand, helping out China, and that makes no sense,” said Milin. “I don’t think that that is consistent with foreign policy of this or any other U.S. administration.”

Democrats are in the minority in both houses of Congress now, and Republicans plan to pass a tax bill through the budget reconciliation process that would sideline Democrats, allowing Republicans to bypass the requirement for a two-thirds majority in the Senate to overcome a filibuster. Nevertheless, Democrats nevertheless reintroduced a bill last week that might have some influence on the tax debate, especially since the Trump administration has expressed the desire to bring jobs back to the U.S. from abroad. Sen. Sheldon Whitehouse, D-Rhode Island, and Rep. Lloyd Doggett, D-Texas, reintroduced the No Tax Breaks for Outsourcing Act, which is designed to eliminate provisions in the Tax Code that encourage companies to shift jobs and operations overseas. 

The Trump executive order seems to envision possible retaliatory actions by the U.S. against other countries that could come in the form of tariffs or even sanctions. 

“It could be a form of trade sanctions, or even potentially an additional tax on U.K. companies operating in the U.S.,” said Cobham. “The U.K., because it’s quite isolated now, having left the European Union, is one that you can see being picked off in that way. But the European Union has also committed to introduce the UTPR, the Under-Taxed Profits Rule, and that’s the one where you where you can say, if the headquarters country is not applying a reasonable minimum rate of tax and the multinational operates in your country, then you can use the UTPR to apply that top-up tax. So I think that will be the big clash. Canada’s DST is interesting, but the European Union’s UTPR is the big one. If in effect, the Trump administration’s investigation over the next 60 days finds that the EU’s UTPR is effectively in breach, in their view, because they they would say it’s extraterritorial to try to top up the taxes being paid in the U.S., whereas the EU would say this is making sure that economic actors within the EU are paying fair tax. But that’s the difference, the tension this is bringing out. If there is a specific proposal to put some kind of tariff or tax measures on European Union countries or their multinationals, this very quickly comes to a head. It feels like the OECD proposals are already faltering. I think this is really the end of any prospect of global adoption, certainly, and the question is really whether it boosts momentum for the UN process instead.”

Disillusionment

The U.S. isn’t the only country that has become more skeptical about the OECD framework, and that could pave the way for the UN framework to make more headway.

“Hstorically, the OECD has really led the way here, but what happened in 2022 was a UN resolution,” said Cobham. “That’s something that the G77, the countries of the developing world, have really wanted for about 20 years, but have never been able to make progress with. What happened in 2022 was that so many OECD member countries had become so disillusioned with the OECD process that the resolution to begin looking at a UN convention went through the General Assembly by consensus. And that was quite remarkable, really unprecedented. Since then, they’ve had an ad hoc committee, as they call it, of delegates from every country in the world putting together the terms of reference for the full negotiations.”

Those delegates began meeting last week and plan further talks. “We have a schedule now for about two and a half years of negotiations to create a framework convention,” said Cobham. “That can do two things, really. It can create new rules within the convention, but as we have with the UNFCCC [United Nations Framework Convention on Climate Change], it will create a framework body. They’ll be able to set new tax rules in the future, on top of anything that’s agreed in this two and a half years in the convention. Potentially, this will displace the OECD as the global tax rule setter, and in that shift, the U.S. will lose the power of veto that it effectively has in the OECD.”

On the same day Trump signed an executive order repudiating the OECD global tax deal, he signed another executive order revoking U.S. participation in the Paris climate agreement, which the Biden administration had reinstated after Trump removed the U.S. during his first administration. Can he reject a UN agreement on taxes in a similar way? There are important differences.

“I think the dynamics are different in the sense that in the Paris Agreement, there isn’t any mechanism against noncooperating countries,” said Cobham. “It may make it harder for the world to limit the degree of climate damage, but it doesn’t give anyone else the power to try to punish the U.S. And nothing that other countries do on climate, unless they were to come up with some kind of sanctioning measure around U.S. carbon emissions, let’s say, but that’s really not being thought of. Whereas on the tax side, you can move ahead very quickly — and you might move ahead quicker if you don’t have the U.S. at the table — with measures that will apply to U.S. multinationals in other countries where they operate, so almost without anyone trying, the tax convention will have an impact on U.S. economic actors. And I think that means the dynamics are different. I think it would be very hard for Trump to ignore that this is happening, even if he thinks the UN is worthless or illegitimate or anything else. The fact that this will affect the taxes paid by U.S. multinationals may affect the access of U.S. financial institutions to world markets if they’re seen as outside the cooperative sphere. The convention could do things in that space too. All of that means that the lobbying pressure from business and finance on the Trump administration on the Treasury, I think, would be hard to resist.”

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IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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