Terence Corcoran: The international corporate tax regime is part of the construction race backwards


G7 communiqué clearly aims to recover corporate income and profits to finance acceleration of government and financial control

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And the slips keep coming, fat political slippages after another, retreating into an old world economic order dominated by higher taxes, massive increases in government control, and a global governance system dominated by a friendly relationship between politicians and business leaders. From global corporate tax reform to central bank interventions to increasing financial sector takeover of energy investment decisions, the Build Back Better movement is gaining momentum in reverse. .

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Top of the charts this week is the agreement between G7 countries to impose new tax rules on international corporations. At least it seems like a deal; details are few beyond the constantly regurgitated claim that the goal is to reverse the so-called “race to the bottom” of international corporate taxes.

Under the new regime, outlined in a communicated, it’s about launching a race to the top of corporate taxation. How far can we go? “It’s a starting point” noted French Finance Minister Bruno Le Maire at the end of the G7 ministers’ meeting over the weekend in London. “In the months to come, we will fight for this minimum corporate tax rate to be as high as possible. “

We are talking about a minimum corporate tax rate of 15%. 100 that would be adopted by all nations. The current federal corporate tax rate in Canada is 15 percent, but provincial corporate taxes raise the national average to 26.5 percent. This rate is viewed by proponents of taxation as the product of a “race to the bottom” among nations. Over the past 30 years, the average corporate tax rate in Canada has risen from around 50% In the 1980’s before reaching 43 percent in the 1990s, then 26 percent in the last decade.

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But even at this low rate, Finance Minister Chrystia Freeland complains that Canada is not globally competitive with countries that use tax policy to attract investment and create jobs. “In today’s world,” she said Recount CBC Radio Monday, “Businesses Can Shop. And especially large multinationals, they can move their base of operations to a country that has a much lower tax rate than Canada and avoid paying taxes here. And this is a problem for our country. It is a problem for middle class Canadians. And it’s also a problem for Canadian businesses – all Canadian businesses that don’t and compete with businesses that do.

The Canadian plan is therefore to get the rest of the world to raise corporate tax rates to at least Canadian levels, supposedly to prevent Canadian corporations from seeking the best tax rates, for example in Ireland, by Hungary and China, where tariff reductions exist or are negotiable.

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It will not be easy. The G7 summary plan now goes to the G20 and finally to an agreement between 139 countries under the aegis of the OECD. The underlying assumption is that trillions of dollars can be extracted from international corporations to be redistributed by politicians with other agendas.

And it’s not as if the tax revenues of G7 corporations have declined. A Caton institute remark by Chris Edwards notes that corporate tax revenues among nations have been stable since the 1960s and actually increased during the period when the so-called race to the bottom was taking place.

As the Wall Street Journal said the other day, “Chinese officials must be drinking their tea while reading the G7 press release. “

Ah yes, that communicated. Forget the headlines. The tax scheme took up only one paragraph in a 20 paragraph document that aims to continue the remake of the global financial system and the global economy.

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Here is a sample of the dominant paragraphs:

Paragraph 6: “We welcome the continued commitments to tackle climate change made by financial companies around the world, including through their active participation in the Glasgow Financial Alliance for Net Zero. “

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  4. A new document estimates that the average annual number of new public offerings (IPOs) on the TSX has fallen from 41 in the 1990s to 14 in recent years.

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Paragraph 7: “We recognize that climate change presents increasing physical and transitional risks to regulated financial institutions and to financial stability, and that these risks have distinct characteristics that we must take into account. G7 authorities consider it important that financial firms manage the financial risks of climate change using the same risk management standards as those applied to other financial risks. G7 central banks will assess the risks to financial stability posed by climate change and consider drawing, where appropriate, from scenarios published by the Greening the Financial System Network. Central banks will share lessons on how to factor climate-related risks into their own operations and balance sheets, where appropriate, and look forward to discussing later in the year how they might make their own disclosures on the based on the recommendations of the TCFD (Task Force on Climate Related Financial Disclosure).

There is more. The G7 statement is clearly aimed at clawing back corporate income and profits to fund accelerating government and financial control as part of a post-COVID climate reset to do better by stepping back.

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In-depth reporting on The Logic’s innovation economy, presented in partnership with the Financial Post.

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