Corporate Tax

The worldwide corporate tax fee illustrates the variations between federal companies and the province

“I think Canada and various other governments wanted to tax Amazon just like Walmart, which is more of a physical store. I think that was definitely the original motivation behind it all, ”said Baloria.

It is clear that the province and federal government are not on the same side when it comes to global corporate tax policy, says a local economist.

On July 1, the Organization for Economic Co-operation and Development (OECD) announced that 132 countries would participate in a new framework for international tax reform that would provide for a minimum global corporate tax rate of 15 percent.

The move is being taken to reform the global tax infrastructure to prevent large multinational corporations from setting up tax havens to avoid taxes.

The 15 percent rate may have little to no impact on Alberta’s ability to involve large multinational corporations, but it shows the stark differences between provincial and federal government political ideologies, said Vishal Baloria, a professor with the Alberta School of Business from the University of Alberta.

“It shows how different, how diametrically opposed, what our provincial government and our federal government wanted to convey, what I do not think is good,” said Baloria.

It is clear that the Alberta government is making competition a high priority as the province accelerated a corporate tax cut to eight percent in July 2020.

“[Alberta] believe clearly[s] that this way we will attract banks and tech companies from central Canada – maybe from Toronto and Montreal. … otherwise they wouldn’t have done it, “said Baloria.

But based on how quick Ottawa was on board for a global tax, Baloria said it seems the Feds don’t value competition in the same light as Alberta.

“They seem to think it’s going to happen anyway – which means the United States and a number of European countries are behind it – so why not, let’s just work together,” Baloria said.

Baloria has no opinion on the number itself, but said he has concerns about collusion by countries and how it could affect competition in a free market.

“Just think from the consumer’s perspective. When you go out and buy a coffee, would you prefer the five coffee shops you could visit all to coordinate and set a specific price? Or would you prefer to run the five coffee shops independently of one another? [and set pricing] depending on the quality of the product and various other things?

“We usually think competition is a good thing,” he said.

Deputy Secretary of State for Natural Gas and Electricity Dale Nally said this week that Alberta has the most competitive business taxes in Canada, making it one of the most attractive job-creating investment destinations in all of North America.

“Alberta’s job creation tax cut has benefited all industries and supported projects of all sizes, including the major job-creating natural gas and power industries that are under my mandate as minister and employ so many people in St. Albert and Sturgeon Counties.” Region “Nally said in a statement emailed to The Gazette.

Competitive tax rates are an integral part of Alberta’s recovery plan, Nally said.

According to the OECD, the global tax rate framework will be finalized in October and includes a two-pillar approach.

The first pillar would shift some of the taxation rights of large multinational corporations from their home countries to the markets in which they do business and generate profits, regardless of whether they are physically present there, according to an OECD press release.

The second pillar would use the global minimum corporate tax rate to end competition between countries for corporate tax.

These pillars would be created to include digital companies as well.

Baloria said companies like Amazon have stated that they prefer the one tax number because it makes things easier.

“One perspective on this could be that they prefer a lack of complexity. Even if they end up paying higher taxes, they may still be better off because the system is at least less complex, ”he said.

A more cynical view, Baloria continued, is that they knew this was going to happen, so it’s more about public relations and embassy management.

“I think Canada and various other governments wanted to tax Amazon just like Walmart, which is more of a physical store. I think that was definitely the original motivation behind it all, ”said Baloria.

The 15 percent rate is estimated to result in additional global tax revenue of approximately $ 150 billion annually.

Baloria believes that cooperation between countries should take the form of international penalties when companies evade taxes and commit tax fraud.

“With things like that, I think we should work with other countries. But for almost everything else … I think our current tax system … was fine. Not perfect, but good in the sense that it had elements of collaboration. But it also has or had competitive elements.

“I think you want both. They don’t want to cooperate on everything because that’s basically going to be a cartel. You don’t want to compete in everything because then it’s just a race to the bottom. “

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