Global Minimum Tax Set for 2026
As part of Budget 2024, the Government of Canada announced that they will be implementing a global minimum tax starting in 2026 to “ensure that large multinational corporations pay at least 15% tax on their profits wherever they do business”
$6.6 Billion in New Revenues Projected
The Government has signaled that they will be moving ahead with legislation titled the Global Minimum Tax Act, which they plan to “introduce into Parliament soon.”
Government figures estimate that this tax will increase revenues by $6.6 billion dollars between 2026 and 2029.
This initiative isn’t new — the Government has been working on its development over the last couple of years.
In August 2023, the Federal Government introduced draft legislation outlining how it could implement a global minimum tax on multinational enterprises in Canada with annual revenues just under Cdn $1.1 billion.
It is unclear if this $1.1 billion threshold, or which parts of the draft, will make it into the final Bill.
138 Countries Participating
According to the World Economic Forum, 138 members the OECD/G20, including Canada, agreed in July 2023 to conduct a major reform of the international tax system, and proposed this new global minimum tax of 15%.
The underlying aim of a global minimum tax is to ensure that large multinational companies pay more taxes in countries where they have customers and less in countries where they have headquarters and operations.
“We’re very far from having solved the problem of tax justice in this world. For one thing, the 15% minimum tax is still much lower than what small and medium businesses pay in most countries in this world … so we really need to fix these loopholes at the top of the tax system,”
– Lucas Chancel, Associate Professor, Sciences Po. Davos, 2023.
The Target? Tax Havens
At its heart, a global minimum tax is designed to end tax-havens, putting an end to the practice of securing lucrative jobs by undercutting higher taxing countries.
Under this regime, no matter where a company operates, they will always have pay the same minimum amount of tax.
Why move your operation if doing a “Double Irish Dutch sandwich” will no longer net you a lower tax rate?
Minimum global taxes have had some success — tax-havens like Ireland, Luxembourg, Switzerland and Barbados, are implementing the minimum rates, according to the Financial Times.
The Potential for Rogue Actors
With only 138 of the 195 UN recognized countries signed on so far, an opportunity still exists for non-signatory countries to induce multi-nationals to set up shop in their jurisdictions by offering tax breaks and perks.
The potential for new tax-havens to pop-up is a very real risk, and something that is not currently fully addressed by this tax regime.
