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Canada Global tax accord could earn Canada up to $4.5 billion per year, says Freeland

12:41  16 october  2021
12:41  16 october  2021 Source:   cbc.ca

OECD: Towards a taxation to 15% of multinationals after the "yes" of Dublin

 OECD: Towards a taxation to 15% of multinationals after the © AFP - Stringer The Minister of Irish Finance, Pascal Donohue. October 7, 2021 in Dublin. Where to place tax sliders compared to multinational companies? Outstanding since the adoption of a minimum tax historical project on the largest global companies last July, this question could know its outcome this Friday, October 8th. Because the main obstacle seems to have been crossed. Ireland has decided to put an end to its opposition to the project of global reform of business taxation.

Freeland confident in Canada 's economy amid global supply chain issues. Singh would also impose a 20 per cent foreign buyers' tax on residential property purchases and a temporary COVID-19 "excess profit tax " of 15 per cent, applicable to extra earnings by big companies. "It isn't going to be the workhorse of revenue generation that income taxes or sales taxes are, but I think it is really important for that other objective of decreasing inequality," said Sheila Block, a senior economist at the Canadian Centre for Policy Alternatives, referring to the wealth tax .

Freeland said the issue was of particular importance to Canada as a "relatively high- tax country." The measures will need to find broader agreement at a meeting of the G20 - which includes a number of emerging economies - due to take place next month in Venice. Important details remain to be negotiated When asked about the impact on Canadian companies, Freeland said : "I'm not going to go into the specifics because I think it's still a little bit too early," adding that details need to be fleshed out. Freeland said Canada will still move ahead with its own planned digital services tax , similar to

Minister of Finance and Deputy Prime Minister Chrystia Freeland holds a press conference in Ottawa on Wednesday, Oct. 6, 2021. © Sean Kilpatrick/The Canadian Press Minister of Finance and Deputy Prime Minister Chrystia Freeland holds a press conference in Ottawa on Wednesday, Oct. 6, 2021.

Finance Minister Chrystia Freeland says Canada stands to collect as much as $4.5 billion dollars a year through a landmark deal involving 136 countries that will require the world's largest corporations to pay more in taxes.

It's the first time she's released a revenue estimate from her department since the deal was reached a week ago. It comes just as some critics of the deal are suggesting Canada would do better if it went ahead with the digital services tax set out in Freeland's April budget.

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Receive free Global trade updates. We’ll send you a myFT Daily Digest email rounding up the latest Global trade news every morning. Canada ’s finance minister has called the US proposal for a global minimum corporate levy a “breakthrough moment” in deadlocked international tax talks, in the latest sign of the growing momentum behind a deal on taxation of large tech groups. Speaking in an interview with the Financial Times, Chrystia Freeland said her government remained committed to implementing its own digital service tax in January, barring an accord among the world’s wealthiest countries.

Freeland says she is disappointed there are some businesses that seem not to be behaving as responsible corporate citizens while receiving taxpayer-funded federal aid to survive the pandemic. The airline on Monday disclosed in its annual proxy circular to shareholders that it gave million in bonuses to people the investor document called instrumental to the airline's survival over the past year as air travel plunged during the pandemic. In a lengthy comment Wednesday, Freeland , calmly and slowly, said she was disappointed in how some businesses seem not to be behaving as responsible

"There are still some final details being hammered out, so the numbers I'm giving you are not exact," Freeland said in an interview with CBC's The House airing Saturday.

"Having said that, the best calculation the Department of Finance has right now is that when this deal comes into force, it will be worth $4.5 billion in additional revenue for Canada every year."

Under the agreement reached at the Organization for Economic Cooperation and Development, many of the world's biggest multinational companies will be required to pay a minimum corporate tax rate of 15 per cent in 2023.

Starting in 2024, the agreement will also require multinational companies — particularly digital giants such as Amazon, Facebook and Google — to pay taxes on profits in the countries where they are earned, even if they have no physical presence there.

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Freeland said the first pillar of the plan includes allocating taxing rights to market jurisdictions where the world's largest multinational corporations do business regardless of whether they have a physical presence there, she said . The second prong involves a 15 per cent global minimum corporate levy to deter big companies from making use of low-rate tax havens, a scheme that has cost governments across the world billions of dollars. "This is really bringing the global tax system in line with the realities of the global economy of the 21st century," Freeland said in a Saturday teleconference.

Critics of the deal have argued Canada would raise more money under Freeland's proposed 3 per cent tax on revenues from those digital services. That tax, which was to kick in next year, is being put on hold as talks continue on finalizing the global deal.

Global deal the 'best outcome' for Canada: Freeland

The parliamentary budget officer estimated this spring that the Canadian tax would raise $4 billion over five years.

Freeland said the math clearly works in Canada's favour under the global deal.

"Our own calculation, which we did put into the fiscal framework on the DST, was that that would bring in about $700 million a year. So this OECD deal, just purely on the numbers, is a much better deal for Canada."

Freeland said that the proposed digital services tax will be brought in, and applied retroactively, if the global deal ends up not being implemented.

"I have put in place an insurance policy for Canadians," she said. "My hope and intention — and I'm going to put my shoulder to the wheel and work really, really hard for this — is that this international deal happens because it is overwhelmingly the best outcome for Canada and Canadians."

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Deputy Prime Minister Chrystia Freeland said Canada strongly supports international efforts to ensure that all corporations, including the world's largest corporations, pay their fair share. "I welcome this historic international agreement. Countries would sign up to a diplomatic agreement to implement the tax on companies that have no physical presence in a country but earn profits there, such as through digital services. That provision would affect around 100 global firms. The second part of the deal, the global minimum of at least 15 per cent, would apply to companies with more than 750 billion euros

" Canada cannot be competitive until all Canadian women have access to affordable child care." The fall economic statement tabled by Freeland includes -100 billion in unspecified fiscal stimulus spending over the next three years , earmarked for jump-starting an economy hammered by lockdowns. The government says the current regime is unfair to Canadian companies and "deprives the government of tax revenues that could be used to better the lives of everyone." Freeland said sales taxes will apply to all goods and services consumed in Canada — regardless of how they are

Freeland isn't alone in praising the global deal. G20 finance ministers meeting in Washington this week endorsed it, setting the stage for formal ratification by the leaders of the world's largest economies at the summit later this month in Rome.


Video: Freeland confident in Canada's economy amid global supply chain issues (Global News)

A raw deal for low-income countries?

"This agreement will establish a more stable and fairer international tax system," the ministers said in a media statement after their meeting.

But critics warn that the terms of the agreement will disproportionately benefit the world's wealthiest nations, where most multinationals have their headquarters.

Ian Thomson, policy manager for Oxfam Canada, said the global accord short-changes less wealthy nations.

"Low-income and middle-income countries, they need hospitals, they need stronger health systems, they need strong education systems and they need to prepare themselves for being buffeted by decades of climate change," he told CBC.

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"So with all of these crises, to deny low- and middle-income countries a fair share of the global tax pie is unjust."

But Freeland and U.S. Treasury Secretary Janet Yellen insist that the deal, with its minimum 15 per cent corporate tax rate, will end what they call a "race to the bottom" driving countries to compete against each other to attract large multinationals by offering lower and lower corporate tax rates.

Treasury Secretary Janet Yellen speaks during a House Financial Services Committee hearing on Sept. 30, 2021 on Capitol Hill in Washington. © Al Drago/Associated Press Treasury Secretary Janet Yellen speaks during a House Financial Services Committee hearing on Sept. 30, 2021 on Capitol Hill in Washington.

"The only losers from this deal are big multinational companies who are currently using globalization and the loopholes it has created to avoid paying taxes," Freeland told The House.

"So what I would say to people is, you look at the status quo and you look at this deal. And I have not heard a single person make a compelling case that the status quo is better for Canada and Canadians than this deal, or that the status quo is better for the poorest people in the world."

Freeland was less specific when asked how the extra revenue will be spent in the years ahead.

The federal government spent massively to counter the economic impact of the COVID-19 pandemic, racking up record deficits to help individual Canadians and businesses make ends meet.

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Freeland refused to say if the extra money from the tax accord would be used to pay down debt, or if she might follow the example of another Liberal finance minister — Paul Martin — who divided budget surpluses between debt repayment and tax cuts.

"I think the approach our government is taking to the fiscal situation in Canada is to say we made a commitment in the April budget to have a steadily declining debt to GDP ratio, and we continued to show that commitment in the platform on which we campaigned," she said.

Costly commitments

The Liberal government made some expensive commitments during the recent election campaign, including a $30 billion investment in a national child care program, money for social housing and funding to reduce greenhouse gas emissions.

And there's a more immediate concern. Many of the federal government's emergency relief programs, including wage and rent subsidies and the Canada Recovery Benefit, are set to expire next week.

Freeland said she's been discussing the future of those programs with economists, businesses and labour leaders as the Canadian economy shows signs of stronger growth and job creation than anticipated, despite a fourth wave of the pandemic.

"I have a stack of papers in front of me about precisely this issue," she said.

Canadians will have to wait until next week for a decision on whether some — or any — of those programs will be extended.

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