Chrystia Freeland says G7 proposal will stop big companies from dodging taxes in Canada

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Chrystia Freeland is after some very big game.

Over the weekend, Canada's deputy prime minister and finance minister cut a deal with her Group of Seven (G7) colleagues to establish a global minimum corporate tax.

The proposed 15 per cent baseline global tax floor is supposed to make it harder for multinational giants like Amazon and Facebook to dodge taxes on their huge global profits.

But, to work, the plan will need the approval of more than just the seven powerful countries who got together over the weekend. The G7 position will now need to be brought to a meeting of G20 countries next month, followed by an ongoing dialogue led by the Organization for Economic Co-operation and Development (OECD) involving more than 125 countries.

Freeland spoke to As It Happens host Carol Off about the agreement. Here is part of their conversation. 

What did you mean when you said that this deal shows it's possible to end the global race to the bottom on taxation?

The situation we have in the world today is that Canada's tax base — which we really need to provide the services that Canadians need, for good schools, good hospitals, the social safety net that COVID has shown us is so important — that requires a tax base.

But in the world today, companies can jurisdiction shop. And especially big 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 that is a problem for our country. It's a problem for middle-class Canadians. And it's also a problem for Canadian companies — all the Canadian companies who aren't doing that and who are competing with companies that do do it.

These very large multinationals are very adept at dodging taxes. They know how to play the game. They have armies of lawyers. So what makes you so sure they won't find loopholes in whatever international law should come out of this?

They are adept at it, Carol, but that doesn't mean we should give up. And it is precisely because they are so adept that it is really important having this big international push to set a floor to end this tax race to the bottom and to solidify the tax base that Canada has and that Canada needs.

Who would actually enforce this internationally?

What we're building towards is an international tax treaty that countries will ratify and, therefore, will enforce themselves.

But is there an agency, is there a body, that you see providing the oversight to see where they have been adept at dodging this?

What will happen is if a country that is party to this does not live up to these rules, then countries can go in and claim ... back the tax that they're not getting. So that's going to be what pushes countries that are parties to this agreement to enforce the rules. Because if they don't collect the tax up to 15 per cent, we can go in and get it for ourselves.

Other countries that are losing out might be able to get some of this money. What's in it for us?

Well, we are one of the countries that's losing out, Carol.

Our weighted average provincial and federal corporate tax rate today is 26.2 per cent. The floor that we agreed to push for is 15 per cent. So that's a lot lower even than where we are.

And there are countries that are even lower than that. Just to give one example of a country in Europe, the Irish corporate tax rate is 12.5 per cent. And I even just in the past few weeks have heard some Canadian companies saying to me, "You know, we're thinking about moving to Ireland. It has a lower tax rate."

When this rule comes into effect, it will stop that kind of thing from happening.

We heard your counterpart, U.S. Treasury Secretary Janet Yellen. She said that ... [this agreement] shows that multilateralism is back after the Donald Trump years. There are a lot of people that aren't happy about that.... They see that when we have these multilateral deals, these global arrangements, that we have to cede some of our sovereignty to international bodies. What would you say to people to reassure them that we're not ceding our sovereignty here?

I'll first of all say the Donald Trump years were not very good for Canada. And we had to — and I think we successfully did — fight very hard to defend our national interest. But Canada prospers in a world where the liberal democracies can get together and agree based on our shared values to shared rules of the game, to a level playing field. That is what multilateralism is about. And it absolutely benefits Canada as a middle power.

So for Canada, it is a pure positive to have other countries basically sign on to playing by the rules that we're already playing. And you need multilateralism to get them to do that.

You have, still have, to sell this to the G20. How difficult is that going to be?

There is work to do. And I'm going to kind of pile in on your question, Carol, by saying we have to sell it to the G20 and then we have to sell it to the common framework at the OECD, which is 139 countries.

But work has been happening for years, both at the G20 level and at the OECD level. The fact that the G7 has agreed [on] a strong common position gives us some momentum going into those further conversations. And I'm optimistic that we're going to get a deal.

Written by Sheena Goodyear and Kevin Robertson CBC News. Interview produced by Kevin Robertson. Q&A has been edited for length and clarity.