Global corporate minimum tax skeptics say “cartels” lead to higher taxes

Scheme for large multinationals that are not paying a fair share to replace digital service taxes

News analysis

Although lacking details at this time, the world’s lowest tax rates are tax increases from schemes for large multinationals and other economies that avoid paying taxes by shifting profits to tax-preferred countries. It has a share of skeptics who foresee a hit.

As of July 9 132 Country agreed Two-pillar approach Organization for Economic Co-operation and Development The (OECD) and the G20 strive to ensure fair tax burdens, regardless of where large multinational corporations operate or where their headquarters are located.

On the phone on July 10th G20 Finance Ministers and Central Bank Governors Meeting In Venice, Deputy Prime Minister and Finance Minister Chrystia Freeland reiterated the two pillar objectives. The first pillar is to allocate tax rights to the countries where the world’s largest and most profitable multinationals, including digital companies, do business, and the second pillar is at least 15% global. She said she has introduced a minimum corporate tax.

“This is where we work to end tax arbitrage and jurisdiction shopping by multinational corporations, end the race to the bottom, and secure the tax base needed to support the public. It’s an opportunity to do it, “says Freeland.

Tax treaties are facing opposition in the US Congress. Republican.. US companies are in the position of being hit hardest.

Canada, with a federal corporate tax rate of 26.5%, has not significantly reduced its corporate tax rate over the past decade like some other countries. The deal will “level the competition between Canadian workers and businesses in the global economy,” Freeland said.

However, some countries, such as Ireland and Hungary, are opposed to the agreement. Corporate tax rate Less than 15%, 12.5% ​​and 9% respectively.

Global Tax Cartel’

Franco Terrazzano, federal director of the Canadian Taxpayer Federation, said the deal would pave the way for tax increases and that politicians would attract investors with more subsidies and special privileges rather than tax cuts. There is.

“A global tax cartel would mean a higher tax bill and an inevitable march to more pork for companies with access to politicians,” he said. editorial..

Jack M. Mintz, president of the University of Calgary’s School of Public Policy, said the government wants to “cartelize” the tax system so that it can build up taxes on multinational corporations to cover their spending. Financial Post Editorial..

In addition, Mintz said the global minimum tax is a global foreign investment because US companies investing in other countries, such as Canada, lose tax credits such as R & D tax credits available to companies in Canada. Said it would discourage. ..

And if a company pays less tax abroad and the effective tax rate paid is lower than the world’s lowest, then the home country Replenishment We collect taxes and collect the difference between the foreign tax rate and the world’s lowest tax rate.

“By accepting global corporate tax, we will effectively agree that the tax rate on foreign companies will be higher than that of domestic companies operating in Canada,” Mintz said.

The opposite situation would hurt Canadian companies investing in foreign countries that offer many tax cuts, such as the United States, Mintz said.

“Under global minimum taxes, Canadian companies do not have access to the same tax incentives as domestic companies operating in foreign markets,” Mintz said.

He added that it is not clear whether the world’s lowest taxes will be in Canada’s best interests.

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For now, the devil is in detail and it will probably be difficult for businesses to start making concrete plans, Bruce Ball, vice president of taxation for a Canadian certified accountant, told The Epoch Times.

“For the minimum tax amount, the key question is what the tax base is and how it works exactly when looking at a particular country … the idea is that with a lot of tax exemptions and credits That’s not the case, “Ball said, adding that taking state taxes or taking into account state taxes is another matter.

The world’s lowest tax “will hurt tax competition,” Terrazzano said. This is preventing politicians from raising taxes.

According to Mr. Ball, in some countries where the effective tax rate is lower than the minimum amount, the company in question pays instead of earning its income by adding tax to reach the minimum amount. The tax rate can be raised to obtain a larger percentage of the tax.

“In general, the country needs to decide whether to adjust the tax rate. [minimum] “15 percent,” he said.

The Venice Conference was the next step G7 conference in London in June Where the first agreement on adjusted taxation was reached following OECD work. Countries signing the agreement aim to complete detailed implementation this fall.

Tentatively, Canada Digital service tax Beginning in 2022, until this coordinated multilateral approach (which was Canada’s strong preference) came into effect.

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