Estimating the impact of exempting US-headed groups from Pillar 2 taxes
On 28 June 2025, the UK Chancellor and other finance ministers from the G7 group of countries (Canada, France, Germany, Italy, Japan, the UK and the US) unilaterally announced that in response to US threats of tax and tariff penalties, US-headquartered multinationals would be exempted from two of the three international ‘Pillar 2’ taxes. These 15 percent global ‘top-up’ taxes for the largest multinationals were agreed in an unprecedented 2021 international agreement brokered by the OECD between over 130 countries, including the US and the UK. They are due to enter into force this year.
These internationally-coordinated minimum taxes are intended to tackle “tax challenges arising from the digitisation of the economy” – the ability of multinational companies to provide digital services around the world without a taxable business presence in the countries where their users are based, and to move ownership and accompanying profits of intangible assets into tax havens.
The G7 announced that US-headed companies will be exempted from two of the three taxes making up the Pillar 2 system. Several major non-G7 countries are now reportedly pushing back, and the OECD is scrambling to get other countries to agree to re-write the rules by the 31 December deadline set by the United States.
US tax experts suggest that the US carve-out, long demanded by US industry lobbyists, will overwhelmingly benefit companies whose profits rest heavily on intangible assets or online services – notably big tech firms and the pharma sector.
Crucially, neither the UK nor any other G7 government has publicly disclosed any estimates of the scale of the tax revenues signed away by the Pillar 2 carve-out.
In their absence, TaxWatch has produced a “ball-park estimate” to fill the gap and inform debate. As explained in this short report, we have used data published by the OECD on US-headed corporate groups’ aggregate profits and taxes in more than 100 countries; as well as company financial documents from major US tech multinationals.
We estimate that under the G7 ‘carve out’, US multinationals could be exempted from around $40.5 billion of ‘top up’ taxes annually by 2026. Using the proportion of US firms’ foreign revenues and profits accounted for by Big Tech firms, we estimate that for this small group of firms alone, the G7 exemption could be worth around $6 billion a year by 2026 – approximately 11% of these tech firms’ total non-US tax bills.