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Dozens of executives from some of the world’s biggest companies travel to Washington this week, opposing plans to raise taxes on foreign investment in the United States, warning that millions of American jobs could be hit.
The lobbying is targeting provisions in Donald Trump’s budget bill. This would allow businesses and investors to impose additional taxes if approved by Congress from countries the United States deems to have a punitive tax policy.
Investors, US companies with foreign owners, and international companies responsible for American operations are all likely to be affected by Section 899 of the bill.
Jonathan Samford, president of the Global Business Alliance, told the Financial Times that around 70 representatives will meet with members of the council this week, with section 899 becoming a “central topic.”
The higher tax threat has destabilized almost 200 foreign companies in US lobby groups, including Shell, Toyota, SAP and LVMH. Many of them fear that it will hit the 8.4 million jobs they offer in America.
“I think the Senate has increased momentum to remove this provision,” Samford said. “The Senators recognize that it is counterproductive to the administration’s economic vision.
The leading financial industry association also plans to oppose Section 899 for members to travel to Washington this week to meet Treasury officials and Republicans on the Senate Banking Committee.
“We are pleased to announce that we are committed to providing a wide range of services,” said Beth Zork, CEO of the Institute of International Banking. “With the US House of Representatives passed, Section 899 puts foreign direct investment in states and communities nationwide, disruption in risky financial markets and American employment.”
According to IIB, foreign banks’ US operations assume more than 70% of the debt issuances of US foreign companies, accounting for almost a third of the debt issuances of US foreign companies.
The foreign bank said it lended more than 1.3tn to US companies in 2023, and that the funding of international companies helped foreign direct investments into the US by foreign headquarters to $540 million, generating $270 billion in revenue.
IIB represents some of the world’s largest banks, including HSBC, BNP Paribas, Royal Bank of Canada, UBS, Bank of China and Mitsubishi UFJ Financial, and the one-year delay is expected to drive tax increases and reductions in scope of measures.
“The Senate is encouraging people to address concerns about this provision and consider amendments that will help maintain international investment in American employment and businesses,” ZORC told FT.
The measure covers the country in what the US calls “unfair foreign taxes.” Most EU countries, the UK, Australia, Canada and others will be affected, according to law firm Davis Polk.
For foreign investors, Section 899 increases taxes on dividends and interest on U.S. stocks and certain corporate bonds by 5 percentage points per year for four years. It also imposes taxes on the US portfolio holdings of currently exempt sovereign wealth funds.
Congressional Republicans are looking for ways to keep up with Trump’s “big and beautiful” tax bills. According to non-partisan tax committees, Section 899 will raise $116 billion over the next decade. Still, the overall bill would add 2.4 tons to U.S. debt by 2034, according to the Congressional Budget Office.
Jason Smith, chairman of the Tax Writing House Ways and Means Committee, said he recently hoped Section 899 would not be imposed as other countries change the law accordingly.
“The big concern is that foreign governments are trying to inhale billions of dollars from US companies based on the agreements entered by the Biden administration,” Smith said.
“This is a way to help them hold back to understand that when they do it in our business there are consequences for their actions. Hopefully, it never works.”
