Ottawa (09 June 2021) — In a letter to Prime Minister Justin Trudeau, the National Union of Public and General Employees backed the call for a global minimum corporate tax rate of at least 21%. The proposal for a global minimum corporate tax rate is being discussed at the Group of Seven government leaders’ summit in Britain later this week.
Global minimum corporate tax rate would help reduce tax dodging
A global minimum tax is intended to make it hard for multinational corporations using tax havens and other tax dodging schemes to avoid paying their share.
As the State of Tax Justice report released last November revealed, countries are losing over US$427 billion a year due to corporate tax abuse and private tax evasion. That’s the equivalent of one nurse’s annual salary every second.
Rate for a global minimum corporate tax important
How effective a global minimum corporate tax will be depends on the rate. Originally, United States President Joe Biden proposed a rate of at least 21%.
That would allow the recovery of US$640 billion in taxes globally. In Canada, a 21% rate would mean an increase of at least C$11 billion from corporate taxes.
What is also important are the rules for how a global minimum corporate tax is applied. There is a long history of governments making announcements on tax fairness that sound great, but loopholes mean that, in practice, very little has changed.
G7 finance ministers' agreement inadequate
On Saturday it was announced that G7 finance ministers had reached agreement on a global minimum corporate tax rate. Unfortunately, there are serious flaws with the agreement.
The proposed rate will only be 15%, which is not seen as high enough to reverse the race to the bottom when it comes to tax rates. As well, loopholes in the proposal mean many large multinationals engaged in tax dodging would be able to avoid it.
This morning The Guardian is reporting that the loopholes are so big that it may not even affect Amazon, which is notorious for its use of tax havens and other tax dodging schemes.
Canada needs to speak out
While the federal Minister of Finance, Chrystia Freeland, has said Canada will support the global minimum corporate tax rate, nothing has been said about what the rate should be or how the tax would be applied. Given what is at stake, that is a serious problem.
An increase in government revenues is needed to meet the challenges facing Canada and other countries in the wake of the pandemic. That means we can no longer afford to allow multinational corporations and the very wealthy to continue to engage in tax dodging. Setting the rate for a global minimum corporate tax at 21% or more and closing loopholes will help us succeed.
As Larry Brown, NUPGE President, pointed out in the letter to Prime Minister Trudeau, “Based on the commitments your government has made for a fair recovery, to tackle climate change and to reduce income inequality, your government’s support for a minimum rate of 21% with no loopholes should be a given.”
People can speak out
NUPGE members are speaking out on the need for a global minimum corporate tax rate of at least 21%. As one of our members in the health care sector pointed out, “we watched as the world’s leaders clapped for us, but now we need them to act for us.”
People can add their voices to the call for a global minimum corporate tax rate of at least 21%. Canadians for Tax Fairness has set up a page for people to let the federal Minister of Finance and their Members of Parliament know that a 21% global minimum is essential for a fair recovery.