The US’ latest tax bill, officially named the One Big Beautiful Bill Act, contains a section that could drastically change the business environment for foreign companies and investors in the US. Section 899 says that the US could increase taxes on foreign investments (such as subsidiaries from non-US multinationals) if these come from countries that the US deems to have unfair trade policies.
House Ways and Means Committee chair and Missouri Representative Jason Smith told Axios: “This is a way to help put them in check, so that they understand that if they do that to our businesses, there will be consequences for their actions. Hopefully it will never take effect.”
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What is it?
Under this provision, foreign companies operating in the US, US companies with foreign owners, multinationals and individual foreign investors from “discriminatory foreign countries” could face higher US taxes.
This would enable the government to retaliate against countries that have imposed digital services taxes (DSTs) on US tech companies by targeting foreign investments from these countries in the US. It comes a few months after US Vice-President JD Vance visited France for the AI Summit, where he warned Europe against increasing tech regulations. US President Donald Trump has also criticised antitrust and privacy cases being pursued by the EU against big tech companies.
Reactions
Already, the US’ dizzying tariff regime was hurting foreign investor confidence in the US. Delegates at the SelectUSA Investment Summit told Investment Monitor that many foreign businesses were delaying plans until they could have a more certain outlook.
“The measure risks detonating investor confidence and could set off a damaging pullback of foreign capital just as the US needs it the most,” Nigel Green, deVere Group’s CEO, tells Investment Monitor in a note. “It punishes the very people whose capital keeps American businesses growing, whose investments fund US debt and whose companies are employing millions of US workers.”
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By GlobalData“Other countries won’t sit idle while their firms and funds are penalised. They will respond. This means potential tax retaliation, trade frictions and further fragmentation of an already fragile global economic order,” Green says. He also emphasised that US workers would suffer the most severe consequences from this law if it came into effect.
Ashley Akin, a tax consultant at RKO Tax and former KPMG manager, tells Investment Monitor over email that this provision “introduces a real pricing risk for foreign investors and multinational firms”.
“If a country enforces digital taxes that the US finds discriminatory, their businesses operating in the US can face extra taxes starting at 5%, climbing up to 20%. These surcharges can override tax treaties,” Akin outlines. “Companies doing everything by the book could still get hit, purely because of the tax policy in their home country.”
Tech gets a new bargaining chip
Already, the Trump administration has suggested that countries regulating US tech companies abroad could provoke more tariffs. These threats were seemingly aimed at Europe, where regulators have begun cracking down on major tech companies for what they view as privacy breaches and anti-competitive behaviour.
Trump’s senior trade adviser, Peter Navarro, has accused the EU of using “lawfare […] to target America’s largest tech firms”.
“Section 899 is designed to protect US tech giants from what Washington views as targeted digital taxes. It gives the US leverage to push back against European digital services taxes, and it can help these companies negotiate better terms abroad,” Akin says.
There is, she adds, a risk of backlash.
“If European countries respond with their own countermeasures, we could see a patchwork of retaliatory rules. That would just create more friction for everyone, not just tech. It is not a clean win [for US tech companies], but it does shift the power dynamic back towards the US,” she notes.
The One Big Beautiful Bill passed in the House with 215 votes for and 214 against. Two Republicans joined Democrats in opposing it. It will now be debated in the Senate, where officials will have the opportunity to amend provisions.
