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The increase is equivalent to four per cent of governments’ current corporate income tax revenues. The OECD said 100 “large [multinational enterprise] groups” will account for over half the reallocated profit from proposals that allow a country to tax firms with sales within its borders, even if they don’t have a corporate presence. (The Logic)

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Talking point: In January, officials from 137 countries agreed to negotiate on the changes and finalize a deal by the end of the year. Today’s analysis incentivizes them to stay engaged in those talks, since most governments would see some revenue gains, with “low and middle-income economies” particularly benefitting. But the document also teases a bigger payoff for a second set of policies that ensure firms pay a minimum level of tax, in part by reducing rate differences between jurisdictions; countries like Ireland have been accused of providing illegal state aid to attract investment by reducing multinationals’ tax burdens. However, the end-of-year timeline only applies to the first set of changes; participating governments said last month the technical details of the second group of proposals still need to be worked out before adoption negotiations begin.

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The 137-country effort to redefine multinational firms’ tax obligations now aims to reach an agreement by mid-2021; the original deadline was the end of this year. The group said “the COVID-19 pandemic and political differences” had slowed negotiations over the new framework, which is designed to tax an increasing share of companies’ revenues in the countries where they earn it, rather than where they’re headquartered. (The Logic)

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Talking point: If they can’t get a worldwide deal, the OECD warned, governments will impose their own digital-services taxes, sparking trade disputes that could combine to cut global GDP by more than one per cent annually. In Canada, the federal Liberals’ throne speech last month promised to target “corporate tax avoidance by digital giants.” The party’s 2019 election platform proposed a three per cent levy on revenue from online advertising and user data for firms making at least $40 million and $1 billion in Canadian and total revenue, respectively—a stopgap pending an OECD consensus. Finance Minister Chrystia Freeland’s office did not directly answer The Logic’s questions about whether the government plans to introduce the measure in the upcoming budget. “Digital taxation is a global challenge, and we will continue to work closely with the OECD to ensure that multinational tech giants pay their fair share,” said spokesperson Katherine Cuplinskas.

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The Toronto Stock Exchange composite had dropped 0.32 per cent by Tuesday afternoon, while the Canadian dollar was up 0.33 cents against the dollar. Freeland, who remains deputy prime minister, added the new role during a 2 p.m. ET swearing-in ceremony on Tuesday, after the incumbent announced his resignation at a Monday night press conference. (The Logic)

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Talking point: Morneau’s departure was reportedly occasioned by disagreements with Prime Minister Justin Trudeau over the size and focus of COVID-19 relief measures and the July revelation that he had only recently repaid costs from overseas trips organized by WE Charity. It comes after a week of headlines about the program disputes, leaks that suggested a shuffle might be coming. Morneau will carry one major innovation policy issue to his next job if his bid to become OECD secretary general is successful. The group is working to unveil a proposed new global tax regime for multinational corporations by October; the Liberals’ promised digital levy, which it has yet to implement, was designed as a stopgap measure until that new system is in place. At Monday’s press conference, Morneau said he wanted to address issues like “international taxation” and “the digital transformation in our world” at the OECD.

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New Delhi has reportedly told the U.S. Trade Representative (USTR) its new levy does not target any specific country. The tax is two per cent of the value of payments taken outside India for services to consumers within it, as well as e-commerce transactions and revenue from ads targeting residents. It took effect on April 1. (Bloomberg)

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Talking point: Google, Facebook and other firms likely to have to pay the tax have reportedly asked for it to be deferred for at least six month due to the pandemic. That would move the start date close to the end of the year, which is when the OECD hopes to have agreement from the nearly 140 governments that are negotiating a new global taxation regime for multinational firms. But many countries are moving forward with their digital-levy plans because the pandemic has hurt their economies, and therefore their tax revenues. The USTR is investigating those measures, including India’s, a process that could end with retaliatory tariffs.

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France and the United Kingdom also promised to impose taxes targeting tech giants like Apple and Facebook a day after the U.S. pulled out of OECD negotiations on the talks. (Financial Times)

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Talking point: Both sides are ratcheting up the rhetoric. French Finance Minister Bruno Le Maire called the U.S. decision a “provocation,” and said his country would pursue a tax on large tech firms “whatever happens,” while Spain said it would not permit “any type of threat from another country.” U.S. Trade Representative Robert Lighthizer said, “The other people getting together and deciding they’re going to take action against the United States without our acquiescence is something that’s not acceptable.” The breakdown in talks bodes ill for the nascent U.S.-EU trade deal, which many now see as very unlikely to be reached prior to the November U.S. election. The breakdown in OECD talks, which include 140 nations, also has global implications. The U.S. launched trade investigations, which can be a precursor to sanctions, into taxes from India and Brazil earlier this month. The federal Liberals, who campaigned on imposing a digital tax and have been involved in the OECD negotiations, have so far avoided a trade investigation from the U.S. Asked if Canada intends to go ahead with a digital services tax without U.S. participation, Maéva Proteau, Finance Minister Bill Morneau’s press secretary, said, “Our government prefers to take an approach grounded in multilateralism. Canada will continue work with its international partners on the issue of digital taxation.”