Canada currently taxes the income of the company within a corporate group that does business in the country, and doesn’t account for the earnings of other parts. But the OECD is proposing giving governments the power to tax a to-be-determined share of a firm’s profits if its sales in that country are significant, regardless of whether it has a physical presence there. “Domestic rules would need to be substantially overhauled to align” with that system, wrote Jeffrey Trossman and Jeffrey Shafer, partners at Blakes, in a C.D. Howe brief released Tuesday. (The Logic)

Talking point: The OECD proposal, a final version of which is due by the end of 2020, was intended to prevent countries from imposing their own digital taxes. However, in the meantime, several—including Canada—are moving forward with their own domestic measures, which could complicate the transition to the new global system. In September, the Liberals proposed a three per cent value-added tax on domestic sales of online ads and user data by firms with $1 billion or more in global revenue, of which at least $40 million is made in Canada. As in the OECD proposal, the government will need to take into account a firm’s total income, but the Liberal version differs by taxing local revenue rather than global profits.