G7 Endorses New Side-by-Side Tax Deal: 5 Key Benefits for US, UK Firms

G7 Endorses New Side-by-Side Tax Deal: Relief for US and UK Firms

In a major international development, the G7 endorses new side-by-side tax deal, providing exemptions for American and British companies from key components of the global tax agreement negotiated under the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS). This move is being seen as a significant shift in the global tax landscape, aimed at bringing more stability and sovereignty to international tax frameworks.

On June 29, the Group of Seven (G7) nations, including the United States and the United Kingdom, released a joint statement confirming the approval of this new tax structure. The announcement came from Canada, which currently holds the G7 presidency, and it outlines the details of the new approach, which has been under negotiation for months.

What Is the Side-by-Side Tax Deal?

The G7 endorses new side-by-side tax deal to offer a parallel tax regime that exempts US-parented companies from certain provisions of the OECD’s global minimum tax rules, specifically the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR).

Under this side-by-side system, US firms will be taxed solely within the United States—on both their domestic and foreign earnings—without being subject to duplicative taxes by other jurisdictions. The proposal seeks to acknowledge and accommodate the existing US tax laws, which already impose a minimum tax on foreign income through mechanisms like the Global Intangible Low-Taxed Income (GILTI) regime.

The United States had previously expressed concerns about how the Pillar 2 rules of the OECD/G20 tax agreement would interact with its own corporate tax code. Treasury Secretary Janet Yellen had raised the need for a more flexible and sovereign-respecting tax framework, leading to the proposal of this side-by-side structure.

Why the G7 Endorses New Side-by-Side Tax Deal

There are several reasons why the G7 endorses new side-by-side tax deal. First, the original rules under the OECD’s Inclusive Framework were designed to prevent multinational corporations from avoiding taxes by shifting profits to low-tax jurisdictions. However, the application of identical rules across all jurisdictions, including those with well-established tax regimes like the US, raised concerns about overreach and redundancy.

The new deal acknowledges the credibility and effectiveness of existing tax structures in the United States. It also reflects the geopolitical dynamics in which the US, under various administrations, has pushed back against perceived international overreach into domestic economic policy.

Importantly, the deal signals a diplomatic victory for both the US and UK. British firms had also raised alarms over the potential for higher tax burdens under the earlier regime. With the new exemption in place, businesses in both countries are set to benefit from reduced tax uncertainty and better alignment with national laws.

Section 899 and Legislative Implications

A critical moment in the journey toward this new agreement came when Section 899—part of a proposed US tax reform bill—was removed from the Senate version. Section 899 would have imposed new restrictions and potential double-taxation issues for American firms abroad. Its removal has paved the way for consensus on the side-by-side framework.

The G7 endorses new side-by-side tax deal in the wake of this removal, recognizing it as a constructive step toward global tax stability. The G7 statement emphasized that the side-by-side system provides “greater stability and certainty” for global corporations and supports a cooperative spirit in tackling BEPS.

Trump’s Stance and Global Implications

Earlier this year, former President Donald Trump, through an executive order, declared that the 2021 global corporate minimum tax agreement—negotiated by the Biden administration and supported by nearly 140 countries—would not apply within the United States. Trump also threatened to impose retaliatory tariffs on countries applying the rules to US firms.

While this announcement created diplomatic friction, it underscored the growing need for a tax framework that is acceptable to all major economies. The fact that the G7 endorses new side-by-side tax deal highlights that global consensus is possible, even with diverse policy approaches.

Impact on Digital Taxation and Sovereignty

The deal is expected to also influence how nations approach the taxation of digital services and tech giants. The statement from the G7 specifically mentioned that the side-by-side framework opens the door to “constructive dialogue on the taxation of the digital economy.”

By respecting existing national laws and providing exemptions, the G7 endorses new side-by-side tax deal to preserve tax sovereignty—a major concern for many developed and developing nations alike. It signals a potential shift away from a one-size-fits-all approach and toward a multi-polar model that respects national differences.

What’s Next: G7 and the Inclusive Framework

The G7 nations have indicated that they will work with the wider OECD/G20 Inclusive Framework to ensure the deal’s implementation does not undermine the broader fight against base erosion and profit shifting. They emphasized their commitment to cooperation and finding solutions that work for all stakeholders.

The G7 endorses new side-by-side tax deal while reaffirming their dedication to global tax reform. Discussions within the Inclusive Framework are expected to continue, with the goal of integrating the side-by-side structure without compromising the integrity of the global tax regime.

Industry Reaction and Future Outlook

The corporate world has largely welcomed the new tax deal. US and UK business groups have expressed relief at the clarity and consistency this proposal brings. They believe the side-by-side approach reduces the risk of double taxation and administrative burdens while still contributing to global efforts against tax avoidance.

Tax experts, however, caution that much will depend on the implementation phase. Countries outside the G7 may seek similar exemptions or challenge the new structure. Nevertheless, the fact that the G7 endorses new side-by-side tax deal suggests a growing recognition that flexibility and fairness must go hand-in-hand in global economic governance.

Conclusion

The announcement that the G7 endorses new side-by-side tax deal marks a pivotal moment in international tax policy. It redefines the boundaries between national tax systems and global cooperation. By carving out exemptions for American and British firms, the G7 has signaled its willingness to accommodate domestic concerns while maintaining the momentum of global tax reform.

As the world navigates the challenges of tax fairness, corporate accountability, and economic sovereignty, the side-by-side deal could set a new precedent. For now, it offers a roadmap for other nations to align domestic priorities with international commitments—while preserving stability, trust, and shared prosperity.

Disclaimer: This article is for informational purposes only. Readers are encouraged to consult official G7, OECD, and Treasury releases for further details.