Finance ministers from across the G7 nations meet at Lancaster House in London, Saturday, June 5, 2021 ahead of the G7 leaders’ summit. THE CANADIAN PRESS/Pool Photo via AP-Henry Nicholls

Finance ministers from across the G7 nations meet at Lancaster House in London, Saturday, June 5, 2021 ahead of the G7 leaders’ summit. THE CANADIAN PRESS/Pool Photo via AP-Henry Nicholls

Canada to tax tech giants as planned despite framework G7 tax deal, says Freeland

The Group of Seven wealthy democracies agreed to support a global minimum corporate tax of at least 15% to deter multinational companies from avoiding taxes by stashing profits in low-rate countries

Canada is proceeding with its plan to tax technology giants next year even as the world’s wealthiest democracies proposed a new global tax framework that includes plans to impose a levee on the firms, federal Finance Minister Chrystia Freeland said Saturday.

Her remarks came following a meeting of G7 finance ministers, who hammered out details of the possible global taxation plan during talks held in London.

The Group of Seven wealthy democracies agreed to support a global minimum corporate tax of at least 15 per cent to deter multinational companies from avoiding taxes by stashing profits in low-rate countries. They also endorsed proposals to make the world’s biggest companies — including U.S.-based tech giants — pay taxes in countries where they have lots of sales but no physical headquarters.

Freeland said Ottawa will still unilaterally impose its own digital services tax starting Jan. 1, 2022. Similar measures are already in place in Britain, France and Italy.

But Freeland noted countries would repeal their taxation plans following a transition to the new global system, she said after the meeting.

“We’ve shown today that it is possible to end the global race to the bottom on taxation and this world’s leading liberal democracies are able to work together in the common interest,” Freeland said in a media call from London.

“Multinational companies need to pay their fair share of taxes. Jurisdiction shopping allows them to avoid doing that.”

Freeland wouldn’t say if any Canadian companies would face the proposed new tax formula, but said some domestic firms would be subject to next year’s digital tax.

Other G7 finance ministers said the framework agreement is not the end of the story. Instead, they said, is meant to propel long-standing discussions among a wider group of countries and signal that taxation changes are necessary.

U.S. Treasury Secretary Janet Yellen said the proposal “provides tremendous momentum” for reaching a global deal that “would end the race-to-the-bottom in corporate taxation and ensure fairness for the middle class and working people in the U.S. and around the world.”

Nations have been grappling for years with the question of how to deter companies from legally avoiding paying taxes by using accounting and legal schemes to assign their profits to subsidiaries in tax havens — typically small countries that entice companies with low or zero taxes, even though the firms do little actual business there.

International discussions on tax issues gained momentum after U.S. President Joe Biden backed the idea of a global minimum of at least 15 per cent — and possibly higher — on corporate profits.

The meeting of finance ministers came ahead of an annual summit of G7 leaders scheduled to take place from June 11-13 in Cornwall, England. Prime Minister Justin Trudeau is planning to attend.

The endorsement from the G7 could help build momentum for a deal in wider talks among more than 135 countries being held in Paris, as well as a Group of 20 finance ministers meeting in Venice in July.

“We understand that this whole idea works only if we get the broadest possible group of countries to sign on and for that to happen they need to have a say as well,” said Freeland, who is also deputy prime minister.

The framework proposes allocating taxing rights to countries on at least 20 per cent of profit exceeding a 10 per cent margin for the largest and most profitable multinational enterprises. That’s something Canada doesn’t currently have.

It also commits to a global minimum tax of at least 15 per cent to be levied on a country by country basis.

The framework could force some of the world’s biggest companies, including U.S.-based tech giants like Facebook, Google, Apple and Microsoft, to pay taxes in countries where they generate significant revenue but have no physical headquarters.

The U.S. considers those national taxes to be unfair trade measures that improperly single out American firms.

Facebook vice-president for global affairs Nick Clegg said the deal is a big step toward increasing business certainty and raising public confidence in the global tax system, but acknowledged it could cost the company.

“We want the international tax reform process to succeed and recognize this could mean Facebook paying more tax, and in different places,” Clegg said on Twitter.

Freeland said it’s important to Canada that a minimum floor be established for corporate taxes.

“We’re a relatively high-tax country. We need to be because we have a high level of public services and that means that a corporate tax race to the bottom really hurts us,” she said.

Conservative finance critic Ed Fast said the party strongly disagrees with Canada’s decision to sign on to a global minimum tax.

“We strongly support efforts to make multinational tax avoiders like Facebook and Google pay their fair share, but that doesn’t mean giving up sovereignty over our tax system,” he said in a statement. “Canadians, and Canadians alone, determine our nation’s domestic tax policy and rates.”

Britain’s Treasury chief Rishi Sunak, the meeting’s host, said the deal would reform the global tax system to make it fit for the digital age and to ensure “the right companies pay the right tax in the right places.”

The global minimum tax rate was backed by U.S. President Joe Biden, who originally pushed for a minimum tax rate of 21 per cent. Biden is proposing a 21 per cent U.S. tax rate on companies’ overseas earnings, an increase from the 10.5 to 13.125 per cent enacted under former president Donald Trump. Freeland credited Yellen with proposing a compromise position.

Freeland also said she had a bilateral meeting with Yellin where they discussed Buy America policies, softwood lumber, the Line 5 pipeline, carbon pricing and climate action.

Like us on Facebook and follow us on Twitter.

Want to support local journalism? Make a donation here.

taxes

Just Posted

The annual Field Day is coming up over June 26 and 27 for local amateur radio operators. File photo
Comox Valley ham radio club having its Field Day on weekend

Club holding separate demonstrations June 26 and 27 instead of meeting as one group

Langley Lake supplies the drinking water for Union Bay. File photo by Bob Ell
Comox Valley board wants to halt Union Bay-area logging plans

Regional district inviting forest company to work on watershed plan

Corwin Fox performs on the grounds of the Courtenay and District Fish & Game Club for a 2021 Vancouver Island MusicFest segment, with the iconic Comox Glacier in the background. The 2021 festival will feature numerous outdoor segments, highlighting the beauty of the Comox Valley. Photo via Island MusicFest
2021 Vancouver Island MusicFest format will showcase the beauty of the Comox Valley

The 2021 Vancouver Island MusicFest -The Virtual Edition - will be like… Continue reading

Black Press file photo
RCMP seek suspect in Vancouver Island-wide crime spree

Crimes stretched from Deep Bay to Qualicum, Ladysmith, Chemainus and Youbou

Things are looking up for Vancouver Island as zero COVID-19 cases have been reported for the first time since October. THE CANADIAN PRESS/Darryl Dyck
Island records zero new COVID-19 cases for the first time since October

For the first time since October, the province is reporting zero new… Continue reading

John Marinus’s daughter, Margaret McCormack, and his wife Denise were out Saturday afternoon to help the Rotary Club of Comox move some tickets for the upcoming Ducky 500, known this year as the John Marinus Memorial Ducky 500. Photo by Mike Chouinard
Rotary Club of Comox Ducky Run tickets still available

Event has been rechristened as the John Marinus Memorial Ducky 500

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Barbara Violo, pharmacist and owner of The Junction Chemist Pharmacy, draws up a dose behind vials of both Pfizer-BioNTech and Oxford-AstraZeneca COVID-19 vaccines on the counter, in Toronto, Friday, June 18, 2021. An independent vaccine tracker website founded by a University of Saskatchewan student says just over 20 per cent of eligible Canadians — those 12 years old and above — are now fully vaccinated. THE CANADIAN PRESS/Nathan Denette
At least 20% of eligible Canadians fully vaccinated, 75% with one dose: data

Earlier projections for reopening at this milestone didn’t include Delta variant

This undated file photo provided by Ernie Carswell & Partners shows the home featured in the opening and closing scenes of The Brady Bunch in Los Angeles. Do you know the occupation of Mike Brady, the father in this show about a blended family? (Anthony Barcelo/Ernie Carswell & Partners via AP, File)
QUIZ: A celebration of dad on Father’s Day

How much do you know about famous fathers?

Emily Steele holds up a collage of her son, 16-year-old Elijah-Iain Beauregard who was stabbed and killed in June 2019, outside of Kelowna Law Courts on June 18. (Aaron Hemens/Capital News)
Kelowna woman who fatally stabbed teen facing up to 1.5 years of jail time

Her jail sentence would be followed by an additional one to 1.5 years of supervision

Cpl. Scott MacLeod and Police Service Dog Jago. Jago was killed in the line of duty on Thursday, June 17. (RCMP)
Abbotsford police, RCMP grieve 4-year-old service dog killed in line of duty

Jago killed by armed suspect during ‘high-risk’ incident in Alberta

The George Road wildfire near Lytton, B.C., has grown to 250 hectares. (BC Wildfire Service)
B.C. drone sighting halts helicopters fighting 250 hectares of wildfire

‘If a drone collides with firefighting aircraft the consequences could be deadly,’ says BC Wildfire Service

A dose of the Pfizer-BioNTech COVID-19 vaccine is pictured at a vaccination site in Vancouver Thursday, March 11, 2021. THE CANADIAN PRESS/Jonathan Hayward
NACI advice to mix vaccines gets varied reaction from AstraZeneca double-dosers

NACI recommends an mRNA vaccine for all Canadians receiving a second dose of a COVID-19 vaccine

A aerial view shows the debris going into Quesnel Lake caused by a tailings pond breach near the town of Likely, B.C., Tuesday, Aug. 5, 2014. THE CANADIAN PRESS/Jonathan Hayward
Updated tailings code after Mount Polley an improvement: B.C. mines auditor

British Columbia’s chief auditor of mines has found changes to the province’s requirements for tailings storage facilities

Most Read