Biden’s global tax plan ‘breakthrough moment’, Canada’s Freeland says
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. But she added she was now “very hopeful” a deal would be reached at a G20 meeting this summer. Canada was “very engaged” in the work led by the OECD on the so-called two pillars — a proposal to tax a proportion of multinationals’ global profits in the countries in which their customers are located, and a minimum corporate tax rate.
“It’s a very important issue for Canadians and Covid has quite rightly intensified the public mood around it just as the whole economy moved into the virtual space . . . but I am a big believer in multilateral action and I am very encouraged by the conversations around it,” she said. “The Biden administration and [Treasury] secretary Janet Yellen personally have taken important steps that really opened the prospect of having a deal.”
Ottawa is joining most European countries in welcoming the Biden initiative, which would involve granting advanced economies the power to raise corporate tax from US tech giants and other large multinationals, in exchange for the introduction of a global minimum corporate tax. On Tuesday, France’s and Germany’s finance ministers said they would support the 21 per cent minimum corporate tax rate Washington was proposing.
The proposal has rekindled OECD-led negotiations thrown into disarray last year when the Trump administration pulled out of the talks and threatened countries implementing their own digital tax with retaliatory trade measures. The discussions aim to set a new taxation regime for the largest digital multinationals such as Google and Amazon and address the issue of corporate tax competition.
For Canada, under its liberal prime minister Justin Trudeau, the US threat was yet another source of discord with Donald Trump’s White House, following disagreements over foreign policy and trade. The former president shook Ottawa in 2019, for example, by pushing through a revamp of Nafta, the trade agreement that had bound Canada and Mexico to the world’s largest economy for a quarter of a century.
Freeland, who triggered Trump’s ire during the ultimately successful trade negotiations, emphasised the “supportive and collaborative” nature of Canada’s relationship with the Biden administration, on topics ranging from the post-Covid 19 economic stimulus to vaccines.
“Philosophically, in terms of economic thinking, our government is well aligned with Janet Yellen and the Biden administration,” she said.
On April 19, the 52-year-old Trudeau loyalist — widely seen as a potential successor — outlined C$101bn ($81bn) in fresh spending measures for the next three years. These will continue to fund support for companies and workers until September, as the country grapples with a third wave of Covid-19 infections and tries to accelerate a relatively slow vaccination rollout that was plagued by early delays in shipments from vaccine makers.
The budget, which means the world’s tenth-largest economy will run another big deficit this year — C$155bn — and tolerate public debt levels of about 50 per cent of gross domestic product, also includes the creation of a universal childcare and early learning system, a long-running ambition of Trudeau’s Liberal party.
Even though the US has reserved American-made jabs for domestic use, Freeland underlined how Washington had agreed to dispatch unused doses of the AstraZeneca vaccine to Ottawa (and to Mexico City). Under the deal, Canada, which has approved the jab, unlike the US, has agreed to ship back the same number of doses at a later stage.
“We have an extremely collaborative relationship with this administration,” she said. “On actually everything, very much including vaccines.”