The inauguration of Donald Trump as America’s 47th president marked a significant shift in U.S. policy, as seen in the immediate issuance of executive orders.
These directives, powerful tools in the hands of a U.S. president, allow for swift action without Congressional approval. While they expedite decision-making, their global ripple effects can be profound.
Among the notable orders issued on Trump’s first day in office were the withdrawal of the United States from the World Health Organization (WHO) and the Organization for Economic Co-operation and Development (OECD) Global Tax Deal.
In American politics, an executive order is a directive from the president that manages operations of the federal government. While not legislation, executive orders carry the force of law, provided they align with existing statutes or constitutional provisions.
These orders are particularly impactful on international policies, as they signal shifts in U.S. commitments to global agreements.
Trump's executive orders, especially those impacting the WHO and OECD, represent more than policy changes—they embody a broader strategy of recalibrating America’s role in global governance.
Executive Order on the WHO Withdrawal - A Side Note with African Implications
The decision to exit the WHO revives debates from Trump’s first presidency, when the U.S. previously withdrew due to perceived inefficiencies and inequities in the organization’s operations.
For Africa, this move raises alarms, as U.S. funding has historically bolstered health initiatives across the continent. Programs targeting malaria, HIV/AIDS, and maternal health heavily depend on WHO coordination.
The withdrawal could disrupt funding pipelines, leaving African nations scrambling for alternative resources to sustain critical health programs.
Exiting the OECD global tax deal: The heart of the matter
Trump’s withdrawal from the OECD Global Tax Deal represents a seismic shift in international tax policy. The OECD deal, a historic agreement signed by over 140 countries, sought to reform global taxation by introducing a 15% minimum corporate tax rate and reallocating taxing rights on multinational profits.
For the United States, the deal aimed to curb tax avoidance and ensure American corporations paid their fair share abroad. However, Trump’s executive order declared the deal as undermining U.S. sovereignty and economic competitiveness.
This withdrawal is a stark departure from the prior administration's commitment to global tax cooperation. By distancing the U.S. from the agreement, Trump positioned America as prioritizing domestic economic interests over global tax harmony. But what does this mean for Africa?
1. Weakened global tax enforcement - The OECD deal was hailed as a victory for developing nations, including those in Africa, seeking to combat tax avoidance by multinationals. African countries often lose significant revenue to profit-shifting tactics, where companies exploit loopholes to report profits in low-tax jurisdictions.
The U.S. withdrawal weakens the deal’s enforcement mechanisms, as American corporations account for a substantial share of global profits. Without U.S. participation, the agreement loses its teeth, potentially emboldening tax avoidance schemes that disproportionately harm African economies.
2. Reduced bargaining power for African nations - The OECD framework provided a platform for African countries to negotiate equitable tax practices with multinational corporations. The U.S. exit disrupts this dynamic, as it may lead other nations to reconsider their commitments. African countries, already at a disadvantage in global negotiations, may find it harder to advocate for reforms that ensure fair tax contributions from multinationals operating on the continent.
3. Shift in investment patterns - Trump’s decision could alter global investment flows. By rejecting the OECD deal, the U.S. may become a more attractive destination for corporations seeking to avoid the 15% minimum tax rate.
This shift could divert investments away from Africa, where nations are counting on multinational activity to drive economic growth. Furthermore, African countries risk being perceived as less favorable destinations for business, particularly if they implement OECD tax reforms while the U.S. opts out.
4. Pressure on domestic tax policies - The absence of U.S. backing for the OECD deal could compel African nations to rethink their own tax strategies. While some countries may double down on efforts to implement reforms, others may hesitate, fearing reduced competitiveness in attracting multinational corporations.
This fragmentation undermines the collective approach envisioned by the OECD, leaving Africa vulnerable to tax base erosion. Trump’s executive order underscores a growing trend of economic nationalism. By prioritizing domestic interests, the U.S. has signaled a retreat from multilateralism. For Africa, this raises questions about the future of global economic cooperation.
Beyond tax policy, the withdrawal reflects a broader disengagement that could impact trade, aid, and investment flows. African nations must now navigate a global landscape where the rules of engagement are increasingly uncertain.
In light of these developments, African countries must adopt proactive measures to safeguard their tax revenues and economic interests:
Strengthening regional cooperation: The African Union (AU) and regional economic blocs should play a more prominent role in coordinating tax policies. By presenting a united front, African nations can enhance their bargaining power in global negotiations.
Enhancing domestic tax administration: African countries should invest in building robust tax systems capable of detecting and curbing profit-shifting practices. Capacity-building initiatives, supported by development partners, will be critical.
Exploring alternative partnerships: With the U.S. stepping back from multilateral agreements, African nations should deepen engagements with other global players, such as the European Union and emerging economies, to secure technical and financial support.
Leveraging technology: Digital tools can revolutionize tax administration, enabling African governments to track multinational activities more effectively. Embracing innovation will be key to staying ahead in an evolving tax landscape.
The U.S. withdrawal from the OECD Global Tax Deal and the WHO underscores the fragility of global commitments. For Africa, these shifts demand resilience and adaptability.
While the immediate effects may seem daunting, they also present an opportunity for the continent to assert its economic sovereignty. By prioritizing regional collaboration, technological innovation, and strategic partnerships, African nations can chart a course that safeguards their tax bases and advances their development goals.
As the dust settles on Trump’s executive orders, the world watches to see how nations, particularly in Africa, respond to these challenges. The path forward will require bold leadership and a commitment to equity in the global economic system.
The writer is an International Tax Advisor and a chartered Accountant