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In a bold move that could reshape cross-border taxation and global capital flows, the U.S. House of Representatives has passed President Trump’s sweeping One Big Beautiful Bill Act, which includes a controversial provision—Section 899, dubbed by analysts as the “revenge tax.”
While the bill still awaits Senate approval, concerns are mounting across the global financial community that Section 899 could undermine foreign investment into the U.S., destabilize the U.S. dollar’s safe haven status, and trigger capital market fragmentation.
What is Section 899?
At its core, Section 899 allows the U.S. to impose retaliatory taxes on foreign entities and individuals from jurisdictions that enforce what it deems “unfair” taxation policies—particularly:
- Digital Services Taxes (DST)
- Diverted Profits Taxes (DPT)
- Any targeted taxation of U.S. corporations or individuals
Starting at 5%, the retaliatory tax rate can rise annually by five percentage points, capping at 20%—a mechanism meant to penalize jurisdictions targeting U.S.-linked revenue streams.
“Section 899 could effectively transform U.S. tax policy into a geopolitical lever,” said George Saravelos, Global Head of FX Research at Deutsche Bank.
Global Repercussions: Allies in the Crosshairs
According to Goldman Sachs and UniCredit, Section 899 may have disproportionate effects on U.S. allies—not adversaries. The UK, France, Germany, and Italy all operate DST or anti-avoidance tax regimes.
- UK Exposure: Roughly 30% of FTSE 100 companies’ revenue is derived from the U.S.
- Most exposed companies: Pearson, Experian, Rentokil, Hikma
- Exemptions apply to companies majority-owned by U.S. shareholders—leading to potential incentives to re-domicile to the U.S. to mitigate tax risks.
Dollar Dominance at Stake
Section 899 is not just a tax matter—it may become a macroeconomic pivot point.
“This could backfire on the U.S., given the large amount of U.S. assets held by foreign investors,” warned UniCredit.
If enacted and enforced aggressively, the provision risks destabilizing trust in U.S. financial neutrality, eroding the dollar’s safe-haven appeal, and introducing geopolitical risk premiums into U.S. asset classes.
Capital Flight or Regulatory Arbitrage?
There is growing speculation that companies with large U.S. exposure but foreign listing status will begin to migrate to U.S. exchanges:
- To avoid Section 899 penalties
- To access deeper U.S. investor bases
- To align with U.S. tax and disclosure regimes
Goldman Sachs notes this “ownership arbitrage” could shift London-listed corporations toward New York IPOs or dual listings, especially for firms already generating the bulk of their revenue in North America.
Strategic Implications for MNCs and Tax Advisors
- MNCs headquartered in Europe or Asia may face higher U.S. tax burdens unless restructured.
- Cross-border tax planning must now account for potential retaliatory taxation on perceived “hostile” tax regimes.
- Institutional investors with U.S. exposure need to review their portfolio tax risk, particularly with holdings in European-listed U.S.-oriented firms.
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