Finance Minister Chrystia Freeland will travel to London this week to attend G7 meetings in person, where she says an international deal on global taxation is within reach.
Ms. Freeland said she agreed to the foreign trip with “great reluctance,” but the meetings are in-person only and she concluded the global tax negotiations have reached a stage where it was important to ensure Canada is represented.
“I’m an optimist. We’ve been having good conversations among our partners,” she said, singling out U.S. Treasury Secretary Janet Yellen in particular for being open to compromise.
“And I think that really does mean a deal is within reach,” she said.
Speaking with reporters Wednesday, Ms. Freeland said she agrees with Ms. Yellen’s comments earlier this year that new global rules on corporate taxation are urgently needed.
“Canada is very supportive of getting a global corporate minimum tax in place. We are supportive of the clear position that Secretary Yellen has taken and the argument that she has made that an international race to the bottom on corporate taxes hurts every country, and acting collectively is the way that we can stop that and maintain national tax bases,” she said.
Negotiations among advanced economies toward a new global tax deal have been under way for years at the Organization for Economic Co-operation and Development, as well as the Group of 20 and Group of Seven. A new deadline for the talks to conclude has been set for this summer. The talks have focused on two related areas – so-called “pillar one” discussions include potential new rules for the digital economy that would align taxation more closely to the location of sales, rather than the physical location of a company. Pillar two discussions deal with new approaches to corporate taxation, including a potential new minimum tax rate.
“We definitely believe the time has come to do an international tax deal on both pillar one, the digital services tax; and pillar two, a global minimum corporate tax. We believe those two things need to go together,” Ms. Freeland said.
In her fall economic update, Ms. Freeland announced that Canada will move ahead with a 3-per-cent tax on revenues collected from Canadian users by large online companies as of Jan. 1, 2022, if no international deal is reached on digital taxation.
U.S. Trade Representative Katherine Tai has expressed concern with Canada’s plan. The U.S. has declared that similar digital services taxes that are already in place in the United Kingdom and several other countries are “unreasonable and discriminatory.”
On corporate taxation, U.S. President Joe Biden has proposed a minimum tax rate of at least 15 per cent. Ms. Freeland declined to offer a firm comment on that proposal.
“A lot of the conversation is going to be about what is an acceptable level. I would just say what is also important for us is to ensure that the rules governing how international corporate taxes are levied for all countries are also an important part of the conversation,” she said.
The U.K. is hosting a meeting of G7 finance ministers and central bankers on June 4 and 5, which will be followed by an in-person meeting of G7 leaders next week.
No Bank of Canada officials will be attending this week’s meeting in person, according to a bank spokesperson.
Ms. Freeland said she discussed the trip with Chief Public Health Officer Theresa Tam, and said participants will be tested regularly for COVID-19. The minister plans to stay at a quarantine hotel upon her return and will then isolate from her family at home in her attic.
“I will be honest in saying that I undertake this trip with great reluctance, because I think it is important for all of us to stay as close to home as possible,” she said. “But my judgment was that it was important for Canada to have a seat at this table ... and I will be careful about following public-health advice.”
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