Overview

• The House-approved tax-and-spending measure has moved to the Senate, carrying Section 899 that empowers the Treasury to penalize investors from countries with ‘discriminatory’ tax regimes.
• Section 899 would let the administration label foreign digital services taxes unfair and impose an additional five percentage points each year on passive U.S. income up to 20 points.
• The Joint Committee on Taxation projects the provision could raise about $116 billion over ten years but may deter overseas investors from U.S. assets.
• Deutsche Bank and Morgan Stanley strategists warn restricted foreign demand is poised to weaken the dollar and reduce purchases of U.S. Treasuries.
• Proponents see the tax tool as leverage to pressure nations like France, Germany and the U.K. to roll back levies on U.S. tech firms, though critics anticipate diplomatic friction.