America has found a new lever to squeeze foreigners for cash- Canadians could be hit hard

Economist via Archive.ph

Selected excerpts- read entirely at the links above

Tariffs particularly enthuse Donald Trump because foreigners pay them—at least as he sees it—and merely threatening them is an easy way to mess with other countries. Two months on from “Liberation Day”, the president and his allies in Congress are trying the same trick with the tax code.

A little past the 1,000-page mark in HR 1, or the “One, Big, Beautiful Bill Act”, sits a provision labelled Section 899, on “unfair foreign taxes”. The proposal, now approved by the House of Representatives and under review by the Senate, would put punitive levies on people, investors and companies from countries with taxes Congress dislikes—like a digital services tax (DST), which mainly affects American tech giants, or an undertaxed profit rule, designed to ensure multinationals pay a global minimum corporation tax. On the naughty list would probably be most members of the European Union, plus Britain, Australia, Canada, South Korea and others.

For now, the language in the bill leaves open a few possible gaps, but punitive rates would almost certainly hit any lending in America by banks from offending countries, dividends on American stocks for those countries’ investors and profits sent home from American subsidiaries. Sovereign wealth funds and public pension funds linked to governments that fall afoul of the Section 899 regime would also lose their existing tax exemptions. Altogether, the move amounts to a radical act of tax protectionism, a near-unprecedented plan to use America’s tax code as a cudgel to knock other countries into line.

If enacted, this would render America all-but-uninvestable for many foreigners, and clog up the supply of capital to American firms. Perversely, companies that had been successfully cajoled by tariffs into scaling-up their American operations would be punished with a surcharge on any cash they sent back to their headquarters overseas. Capital flight could cause bond-market tremors. The bill also gives the Treasury discretion to add new “unfair foreign taxes” to the list and ensnare more countries.

Tariffs were a first step in remaking how America engages with the world. The Trump administration is now following a similar playbook on tax. Foreigners’ labour, investment and business operations in America are treated not as opportunities to be embraced, but choke-points to be squeezed. So far, new tariffs have produced few tangible gains for America. This adventure in cross-border tax policy won’t be any better.

What to do? Edward Jones Investing

The U.S. Federal tax bill and why Canadians should pay close attention

One section of the proposed bill that is catching the attention of Canadians is section 899 “Enforcement of remedies against unfair foreign taxes”.

Section 899

The Trump administration has continued its tough stance on countries that it feels is taking advantage of the United States and its citizens. Section 899 of the “One Big Beautiful Bill Act” has introduced significant tax measures that target corporations, individuals and governments of countries that impose discriminatory taxes on US citizens and corporations by subjecting them to increased tax.

Lastly;

Financial Post:The tax hit to Canadians from Trump’s ‘big beautiful’ bill could be tremendous

The United States House of Representatives last week passed Donald Trump’s One Big Beautiful Bill Act, a voluminous and complex piece of proposed legislation that contains numerous tax amendments that could end up hurting Canadian pension plans and other investors.

If enacted, it would override existing tax treaties and impose significantly higher U.S. tax rates — ranging from five per cent to 30 per cent — on passive income, real property gains and business profits for affected foreign investors.

For countries such as Canada, the implications could be severe if they fall within Washington’s definition of a “discriminatory foreign country,” or what I refer to as a “bad country.”