Deputy Prime Minister Chrystia Freeland on Saturday lauded a deal reached by the finance ministers of the Group of Seven (G7) nations to tax big multinational and back a minimum global corporate taxation rate.
In a tweet earlier on Saturday, Freeland said multinational corporations “need to pay their fair share of taxes,” adding that the G7 has now “outlined a path to make this possible.”
“This is good news for Canadians and Canadian businesses, and will ensure a fair and level playing field for them in the global economy,” she wrote.
Freeland, who also serves as Canada’s Deputy Prime Minister, has spent the last two days in London, England, meeting with her G7 counterparts.
On Saturday morning, the finance ministers of the wealthy G7 nations reached a deal to pursue higher global taxation on multinational businesses such as Facebook, Apple, Amazon and Google.
The countries agreed to back a minimum global corporate rate of at least 15 per cent and for companies to pay more tax in the markets where they sell goods and services.
Freeland told a teleconference Saturday afternoon that the G7 has shown it is possible to end the race to the bottom on taxation.
“We’ve shown today that it is possible to end the global race to the bottom on taxation,” Freeland told reporters. “Multinational companies need to pay their fair share of taxes. Jurisdiction shopping allowed them to avoid doing that.”
However, Freeland said it is too early to say which Canadian companies might be impacted by the minimum global tax.
Freeland maintained that 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.
In an interview with Global News, Patrick Gill, senior director of tax and financial policy at the Canadian Chamber of Commerce, said establishing a global minimum tax is “not a new topic,” adding that it has “been discussed for many years at the international level.”
Gill said while the “devil will be in the details,” the deal “won’t necessarily harm Canada’s competitiveness from a corporate tax rate, which currently stands at a weighted average around 26 per cent.”
But, Gill said the “biggest winner in this” is “certainly” going to be the United States.
“The U.S. is now trying to collect and benefit from new revenues and profits of U.S.-based companies in order to pay for historic new levels of debt and infrastructure spending,” he said.
U.S. Treasury Secretary Janet Yellen tweeted after the announcement, saying the G7 ministers made a “significant, unprecedented commitment today” that she said “provides tremendous momentum towards achieving a robust global minimum tax at a rate of at least 15 per cent.”
She echoed Freeland’s remarks, saying the global minimum tax would “end the race-to-the-bottom in corporate taxation,” adding that it would “ensure fairness for the middle class and working people in the U.S. and around the world.”
Gill said after years of “onshoring and pulling an investment through aggressive tax measures,” the United States is now “trying to have its cake and eat it too, by locking in that investment and making sure it looks more competitive on a global landscape.”
He said the agreement to work towards a minimum 15 per cent global tax rate “will affect other jurisdictions that have a much lower or nonexistent rate and could potentially help Canada play off its other strategic benefits.”
“And so this could be helpful, but the devil will be in the details,” he said.
Gill said Canada has to be “careful as we’re adding a layer of complexity onto existing complexity.”
“Really in my mind, there’s no better time to strike sort of an overall comprehensive review of Canada’s tax regime where Canada’s tax competitiveness lies, vis-a-vis it’s other economic peers,” he said.
In a tweet Saturday, International Lawyer Lawrence L. Herman called the move a “huge deal, not just on the tax side by on trade (relations) as well.”
“It will take pressure off threatened (American) retaliation vs countries applying digital service taxes, including (Canada),” he wrote. “A boost for (international) cooperation.”
But not everyone is in favour of the deal.
In a letter on Friday, Conservative Leader Erin O’Toole called on Trudeau to reject the deal.
“I implore you to reject this new tax proposal during your G7 Leaders meeting and unequivocally state to G7 Leaders that Canadians, and Canadians alone, determine our nation’s domestic tax policy and rates,” the letter read.
-With files from Global News’ David Akin, Reuters and The Canadian Press