Losing billions: Osgoode Hall Law School professor key organizer, speaker at conference addressing huge amounts lost to corporate tax avoidance

A tax law professor with Osgoode Hall Law School at York University will join top Canadian tax experts in Ottawa on July 27 to consider how Canada could implement a proposed global minimum tax designed to help nations reduce the billions of dollars lost to corporate tax avoidance every year.

Professor Jinyan Li is a co-organizer of the Pillar Two Symposium along with HEC Montréal and the Toronto-based Canadian Tax Foundation.

Pillar Two is one of two key components in an international tax agreement signed in October 2021 by Canada and 135 other member nations of the G20/OECD (Organization for Economic Co-operation and Development) Inclusive Framework on Base Erosion and Profit Shifting (BEPS). Pillar One, if made law by signatory nations, would involve reallocating a portion of profits from major multinationals such as some U.S. tech companies to countries where they made their sales. Pillar Two sets a global minimum corporate tax rate of 15 per cent.

BEPS refers to tax planning strategies used by multinational corporations that exploit gaps and mismatches in tax rules to avoid paying tax. Developing countries’ higher reliance on corporate income tax means they suffer disproportionately from BEPS.

A report by the U.K.-based Tax Justice Network last year concluded that countries are losing a total of $483 billion in tax a year to global tax abuse committed by multinational corporations and wealthy individuals – enough to fully vaccinate the global population against Covid-19 more than three times over.

The G20/OECD tax agreement is facing stiff opposition from Republican Party representatives in Washington and some governments such as Hungary. The OECD secretary-general said in May that the deal may not come into force until 2024 instead of 2023, as originally hoped.

Li said that some huge multinationals like Amazon and Apple used to pay an effective tax rate of only zero to five per cent. “They’re quite innovative and very bold in taking advantage of all the legal tax-avoidance strategies,” she explained.

Countries were motivated to reach a deal out of a common desire to reduce tax avoidance, money laundering, terrorism financing and the risk of another global financial crisis as in 2008, said Li.

“But it’s very complicated to turn this (tax) agreement into law, so that’s what this conference is about,” she added. “It can only be done by countries according to their own national laws. There is no international tax organization.”

Li and HEC Montreal accounting professor Jean-Pierre Vidal applied for funding from the Social Sciences and Humanities Research Council (SSHRC) to help cover the cost of the conference. The event is a response, in part, to the federal Liberal government’s April 2022 budget, which called for public consultation on how to implement a global minimum corporate tax. The conference will bring together academics, practitioners and government officials.

Li will speak on a panel addressing the mechanics of legal implementation of Pillar Two and the implications for domestic law (including the existing Canadian international tax regime). The panellists will also discuss Pillar Two in the context of dispute resolution, tax treaties and existing investment and trade agreements, as well as the challenges of consistency across jurisdictions.