Social Policy in Ontario

Countries reach agreement on corporate tax

Posted on October 9, 2021 in Policy Context

Source: TheStar.com — Authors: David McHugh and Danica Kirka

TheStar.com – News
Oct 9, 2021.   David McHugh and Danica Kirka, Associated Press

‘Historic’ deal a win for Canadian middle class, businesses, Freeland says

FRANKFURT, GERMANY—More than 130 countries have agreed on sweeping changes to how big global companies are taxed, including a 15 per cent minimum corporate rate designed to deter multinationals from stashing profits in low-tax countries.

The deal announced Friday is an attempt to address the ways globalization and digitalization have changed the world economy. It would allow countries to tax some of the earnings of companies located elsewhere that make money through online retailing, web advertising and other activities.

U.S. President Joe Biden has been one of the driving forces behind the agreement as governments around the world seek to boost revenue following the COVID-19 pandemic.

The agreement among 136 countries representing 90 per cent of the global economy was announced by the Paris-based Organization for Economic Cooperation and Development, which hosted the talks that led to it.

The OECD said that the minimum tax would reap some $150 billion (U.S.) for governments.

“Today’s agreement represents a once-in-a-generation accomplishment for economic diplomacy,” U.S. Treasury Secretary Janet Yellen said in a statement.

She said it would end a “race to the bottom” in which countries outbid each other with lower tax rates.

“Rather than competing on our ability to offer low corporate rates,” she said, “America will now compete on the skills of our workers and our capacity to innovate, which is a race we can win.”

The deal faces several hurdles before it can take effect. U.S. approval of related tax legislation proposed by Biden will be key, especially since the U.S. is home to many of the biggest multinational companies.

A rejection by Congress would cast uncertainty over the entire project.

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. It is a win for the Canadian middle class and Canadian businesses,” Freeland said in a release. “Canada’s strong and essential social safety net is built on a robust national tax base.”

Freeland said the Liberal government intends to move ahead with legislation finalizing the enactment of a Digital Services Tax by Jan. 1.

She said the tax would be imposed as of Jan. 1, 2024, but only if the treaty implementing the tax regime under this global agreement has not come into force.

Freeland said in that event, the tax would be payable as of 2024 in respect of revenues earned as of Jan. 1, 2022.

The big U.S. tech companies like Google and Amazon have supported the OECD negotiations.

https://thestarepaper.pressreader.com/toronto-star

Tags: economy, globalization, ideology, tax

This entry was posted on Saturday, October 9th, 2021 at 9:53 pm and is filed under Policy Context. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.