Statement by the Deputy Prime Minister on international tax reform negotiations
July 12, 2023 - Ottawa, Ontario - Department of Finance Canada
The Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, today issued the following statement regarding ongoing negotiations by the Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework for a two-pillar plan on international tax reform:
“Canada strongly supports international efforts to end the corporate tax race to the bottom and to ensure that all corporations, including the world’s largest corporations, pay their fair share.
“Canada’s strong and essential social safety net is built on a robust national tax base, which depends on those who do business in Canada paying their fair share of tax. Canada has a clear national interest in the two-pillar plan, which protects against the erosion of Canada’s tax base and which will generate additional revenue for Canada.
“Canada’s priority and preference has always been a multilateral approach. We continue to strongly support the two-pillar plan agreed to in 2021 and we have been actively working with our international partners to bring it into effect. As confirmed in Budget 2023, we are moving ahead with legislation to implement the Pillar Two global minimum tax in Canada, starting at the end of 2023.
“Two years ago, we agreed to pause the implementation of our own Digital Services Tax (DST), in order to give time and space for negotiations on Pillar One. But we were clear that Canada would need to move forward with our own DST as of January 1, 2024, if the treaty to implement Pillar One has not come into force.
“Yesterday, many countries participating in negotiations in Paris agreed to a further one-year standstill on the imposition of any new domestic DSTs, despite there being no deadline stipulating when Pillar One will come into force. This puts Canada at a disadvantage relative to countries which have continued collecting revenue under their pre-existing DSTs.
“Canada does not disagree with the substance of the multilateral treaty that has been negotiated; indeed, we support it fully. However, without any firm and binding multilateral timeline to implement Pillar One, Canada cannot support the extended standstill in today’s ‘Outcome Statement’.”
- Pillar One of the Inclusive Framework plan would ensure that the largest and most profitable global corporations, including large digital corporations, pay their fair share of tax in the jurisdictions where their users and customers are located.
- Pillar Two of the Inclusive Framework plan would ensure that multinational enterprises are subject to a minimum level of tax of at least 15 per cent, no matter where their profits are earned. This will help to end the race to the bottom in corporate taxation.
- To protect the interests of Canadians and Canadian businesses, the government released draft legislative proposals in December 2021 that would implement a Digital Services Tax in Canada. In Budget 2023, the government announced its intent to release a revised draft of these legislative proposals for public comment.
- The Government of Canada first announced plans to implement a Digital Services Tax in the 2020 Fall Economic Statement, as published on November 30, 2020. The tax was due to take effect on January 1, 2022. However, Canada subsequently agreed to temporarily pause the imposition of its Digital Services Tax, in order to allow time for negotiations on Pillar One.
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Office of the Deputy Prime Minister and Minister of Finance
Department of Finance Canada
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