Economy

What now for the G7 tax deal on multinationals?

Published

3 years ago

June 7, 2021

The G7’s weekend agreement on a global minimum corporate tax rate and arrangements for taxing multinationals paves the way for a broader deal in the coming weeks that could reshape cross-border taxation for years to come.

Hailed as historic by its backers, the deal nonetheless contains much detail that still needs to be hammered out in time for countries of the wider G20 grouping to give it their support at a meeting scheduled for next month.

Here is what we know so far and what remains unclear:

WILL THE G7 DEAL APPLY WORLDWIDE?

The G7 deal for a global minimum corporate tax of at least 15% sets the stage for the next step, which is a June 30-July 1 online meeting of the 139 countries negotiating future rules for cross-border taxation at the Organisation for Economic Cooperation and Development (OECD) in Paris.

The countries aim to reach a consensus at the meeting on the details, as much technical work has already been done. Any accord from that meeting will then go before G20 finance ministers for endorsement when they meet in Venice on July 9-10.

The OECD and the United States have said a final sign-off might not be possible until a subsequent G20 meeting in October, because the U.S. position may not be firm by July as a domestic tax package will be going through Congress.

A G20 sign-off would mean the world’s largest economies will implement it, so its reach would effectively be worldwide.

IS THIS THE END OF TAX HAVENS?

If the deal does not kill off tax havens entirely, it will make them far less attractive for many firms looking to cut their tax bill but also burnish their credentials with investors focusing on environmental, social and corporate governance.

The whole idea of the global minimum tax is that it gives countries the right to add a top-up tax on company profits in countries with tax rates lower than the global minimum.

Moreover, the G7 wants the minimum rate to be applied on a country-by-country basis rather than an average across the countries a company operates in – an approach considered far tougher on tax havens.

So if a U.S. company books profit in the British Virgin Islands, where there is no corporate tax, U.S. tax authorities could apply a 15% tax on those profits – if that’s the global minimum figure finally agreed on.

HOW WILL THIS APPLY TO MULTINATIONALS?

A separate part of the international tax talks deals with how to divvy up governments’ rights to tax excess, or non-routine, profit of the biggest multinationals, among them major digital companies such as Apple and Google.

The G7 agreed that governments should get the right to tax at least 20% of the profit earned in their country by a multinational over a 10% margin. All indications are that the excess profit would also be subject to the global minimum.

That said, a lot of the metrics still need to be worked out and there is still scope for such companies to make their point of view heard within the debate.

WHAT ARE THE POSSIBLE LOOPHOLES?

Countries negotiating the global tax are likely to exempt some sectors. For example, extractive industries are likely to be carved out as companies usually pay royalties upfront to the government where the mines or oilfields are located. There has also been talk of carve-outs for certain financial services.

Officials say some nations want wiggle room on tax breaks for research and development. Others, such as China, want to protect low-tax economic zones they use to attract investment.

WILL THIS MEAN BIG GOVERNMENT WINDFALLS?

The OECD calculated in October that a global minimum tax could yield $100 billion a year, or 4% of global corporate income tax. That’s probably on the low side as it was based on a 12.5% rate, which was the focus of talks at the time.

As big as the headline figure sounds, however, it’s a drop in the ocean compared with the trillions of dollars that governments around the world have spent to keep their economies afloat during the COVID-19 pandemic.

WHAT ABOUT THE NETHERLANDS, LUXEMBOURG AND SWITZERLAND?

Such countries with tax advantages have seen the writing on the wall in recent years and have been closing tax loopholes, while trying to compete for foreign capital on terms other than just low taxes.

Ireland, where many U.S. tech companies have big operations, has said it will keep its 12.5% corporate tax rate regardless of what gets decided internationally.

Finance Minister Paschal Donohoe estimates that Ireland’s annual corporate tax take will be about 20% or 2 billion euros lower than it otherwise would have been by 2025 due to the anticipated changes but does not expect a massive outflow of companies from its shores.

Switzerland, which is under pressure from abroad, has promised to eliminate special low tax rates that benefited about 24,000 foreign companies based there.

“Switzerland will take the necessary measures to continue to be a highly attractive business location,” the finance ministry said in a statement.

Thanks to its intricate net of tax treaties with other countries, the Netherlands can expect to remain a conduit for multinationals to pass profits from one subsidiary to another at favourable rates.

While the corporate tax rate in the Netherlands is 25%, the Dutch began this year taxing outbound royalty and interest payments to places where the corporate tax rate is below 9%, and plans to do the same for outgoing dividends from 2024.

However, it is not clear when the G7 agreement will go into effect and the Dutch rules could still change before 2024.

(Additional reporting by Toby Sterling in Amsterdam, Padraic Halpin in Dublin and Silke Koltrowitz in Zurich; Editing by Mark John and David Clarke)

Business

A timeline of events in the bread price-fixing scandal

Published

5 hours ago

September 19, 2024

Anne Joseph

Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.

Here’s a timeline of key events in the bread price-fixing case.

Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.

Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.

Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.

Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).

Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.

June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.

Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”

Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.

July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.

Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)

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Economy

S&P/TSX composite up more than 250 points, U.S. stock markets also higher

Published

5 hours ago

September 19, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.

The S&P/TSX composite index was up 254.62 points at 23,847.22.

In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.

The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.

The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.

The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

Published

19 hours ago

September 18, 2024

Anne Joseph

VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

This report by The Canadian Press was first published Sept. 18, 2024.

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