The US Initiative against Tax Havens

Finally, something that resembles progress. The United States government and its new president, Joe Biden, are putting all of their weight on the scale and proposing a tax for multinational businesses worldwide.

In the middle of a health crisis, the United States is rediscovering its social prerogatives. It finally understands what it means when businesses like Amazon contribute nothing to the public purse while driving thousands of small businesses, actually participating in the vitality of the community, into bankruptcy.

Washington, through the voice of Treasury Secretary Janet Yellen, is looking to convince its partners in the Group of 20 industrial and emerging-market nations to tax multinational corporations at a rate of 21%. The states in which their profits are currently generated would receive the revenue. This is very little, in the context of the time before the conservative revolution at the end of the 20th century, but it’s a real start. We are no longer among the hollow promises of Barack Obama, Emmanuel Macron or Justin Trudeau, or among the cumbersome consultation mechanisms of Pascal Saint-Amans* of the Organization for Economic Cooperation and Development that serve to buy time.

This would be a real step forward in the fight against tax havens. The journal Le Monde justly sums up the situation in its April 6 edition, writing that “this proposition, with its technical details, tolls the bells for tax havens, be they official or de facto like Ireland, where multinational corporations are localizing most of their profits.” Multinational companies would no longer be taxed according to the outdated principle of place of residence of their different branches, considered one by one, state by state. Instead, they would be taxed as internationally constituted groups. Their workers would be considered in their entirety, regardless of whether they reside in the countries where they work or whether they are, as is often the case, artificially concentrated in jurisdictions with convenient non-existent tax rates.

In Canada, federal authorities are being pushed to the wall by this decision. They will need to be clearly reminded. Gone are the times of feigning appropriate indignation while rendering the Canada Revenue Agency toothless, legalizing unwarranted transfers to Barbados and elsewhere and sharing its headquarters with Caribbean tax havens in the hands of the World Bank and the International Monetary Fund.

The different components of the federation are not left out. Quebec enjoys its relative fiscal autonomy in the Canadian Confederation and, in the circumstances, may find the opportunity to claim its constitutional rights on the international scale. Ontario, which houses the global mining industry like a regulatory haven, Alberta, which looks like a petrostate, and New Brunswick, which is sadly captive to the Irving family, must all answer for their complacency and for playing the part of autonomous regimes. This is a lot to ask, but at least, at this stage, legislation of this type must begin to be observed.

We are in an era of transition in terms of ecology and energy. Because of climate change, the loss of biodiversity and the exhaustion of natural resources, our generation will experience a brutal paradigm shift. The states can already seek to regain control in this manner in order to best support this transformation, if they do not want to passively suffer the consequences.

*Editor’s note: Pascal Saint-Amans is the director of the Center for Tax Policy and Administration at the OECD.