Hundreds of millions of dollars in anticipated Bermuda Government revenue from the corporate income tax may eventually evaporate with new US legislation designed to punish countries in league with the Organisation for Economic Co-operation and Development’s plan to derive additional tax from US multinational corporations.

While Bermuda does not appear to be specifically targeted, there are questions as to what would be left on the table once the dust settles from an emerging battle over who will rewrite global corporate tax rules.

Proposals for an escalating US federal tax rate on the investments of non-US individuals and entities — including government entities — are being considered as part of US president Donald Trump’s One Big Beautiful Bill.

The Global Business Alliance reflects onshore concern about how American companies can be affected: “The Bill removes some of the potential discretion over what might be considered ‘unfair’ tax by specifically identifying the undertaxed profits rule, digital services taxes and diverted profits tax as unfair taxes.”

These are references to the proposals promulgated by the OECD in the Inclusive Framework on Base Erosion and Profit Shifting, affecting US multinational enterprises.

GBA said of the American proposal that: “It also permits the Treasury to categorise other taxes as unfair if they are disproportionately borne by US persons, and the Bill provides some guidelines as to what may or may not be considered discriminatory or extraterritorial.

“As several countries already have UTPRs and DSTs in place or are scheduled to implement such taxes in the near future, this could subject US employers to significant punitive taxes if foreign governments impose these taxes on the US.”

The GBA is an advocacy resource for international companies in the United States, actively promoting and defending an open economy that welcomes international companies investing in America.

Section 899 of the One Big Beautiful Bill reveals how Europe now faces a “revenge tax” from the US Government.

A Wall Street Journal editorial said the measure is an attempt to deter foreign taxes arising from the global corporate-tax harmonisation project devised by the OECD.

It reads: “The OECD project includes a ‘Pillar One’ excess-profits tax on large, mostly American companies especially in tech and pharma, and a ‘Pillar Two’ global minimum corporate-profits tax of 15 per cent.

“Section 899 takes aim at governments that attempt to collect those taxes from US companies, and only those taxes.”

Passed by the US House of Representatives last month, the Bill that is now before the US Senate includes a section to punish countries involved in “extraterritorial and discriminatory taxes” designed to capture revenue from multinational groups and/or implementing global minimum tax policies.

The obscure provision has been overshadowed by a list of other controversial proposals in a bill that survived the House by just one vote.

Concern for this section is growing in the US as to how it could reduce foreign inward investment.

Under Section 899, any applicable non-US taxpayers who are subject to US federal income tax or withholding will face tax rate increases of five percentage points for the first year following enactment and five percentage points in each subsequent year — capped at a total increase of 20 percentage points.

Jason Smith, chairman of the US House Committee on Ways and Means, said last week: “If countries impose unfair taxes like those in the OECD plan, an incremental increase up to a 20 per cent surtax will apply on certain income of companies and individuals from those countries.”

He added: “If these countries withdraw these taxes and decide to behave, we will have achieved our goal. It’s just common sense. I urge my colleagues in the Senate to move quickly to pass this Bill and protect Americans from economic bad actors around the world.”

Section 899, entitled Enforcement of Remedies Against Unfair Foreign Taxes, would increase withholding taxes for non-resident individuals and companies from countries that the US believes have imposed discriminatory or unfair taxes.

The tax applies to all large businesses, foreign and domestic and includes the DST, the DPT and the UTPRs.

Governments, corporations, private foundations or individuals from these countries will be charged an additional five percentage points of withholding tax rate each year on their US income, potentially taking the rate up to 20 per cent, until the “unfair tax” is removed.

Public Policy think-tank American Enterprise Institute said the retaliatory taxes on inbound foreign investment is broad and worrying.

A statement argued: “The immediate effect of these taxes is to raise the cost of investment in the United States for foreign-resident individuals or corporations.

“A higher cost of capital would reduce inbound investment, shrink the US capital stock, reduce labour productivity and reduce wages.”