On the Proposed Suggestions to the Globalized Structure for the Taxation of Multinational Enterprises
Abstract
More recently, amongst the international community, there has come to be a concern that many multinational enterprises (“MNEs”) are not appropriately remitting tax revenues to all of the countries in which they operate, but instead, are reverting their residual profits (being the amount of proceeds from business activities remaining once all related expenses are satisfied), for the purposes of taxation, back to their primary country of corporate registration.?This notable increase in the reversion of residual profit is enabled by the continuous rise of the digital economy.?In response to these concerns, the international tax community has proposed a global tax regime for MNEs, referred to as Pillar One and Pillar Two, which address the tax base cyberization problem and (associated) tax base shifting problem, respectively.[1]?
This paper will first lay out, at a high level, the current system for determining the allocation of MNEs’ revenues for the purposes of taxation, followed by a layered example to aid in clarification, a discussion on the concerns the current system enables, a brief overview of the OECD’s response of Pillar One, and some of the practical implementation issues Pillar One faces, concluding with views on how to more easily achieve the Pillar One aims in a fashion that may be met with less resistance.
Introduction
In an increasingly globalized economy, the multinational enterprise (“MNE”) is less the exception, and increasingly the norm; this is especially true in the digital age, where, with the click of a button, or the tap of a screen, many people can have access to almost any good or service from anywhere in the world.?
The marketplace for goods and services was previously small, and primarily locally derived, with imported goods commanding a higher price based on those goods having been bought and paid for elsewhere, along with the additional inputs of transport and human capital necessary to bring those goods to the local market for resale.?It was during that same time in history when many countries, and certainly those countries which are the largest economic players and home to many of the world’s MNEs of today, developed their initial pieces of modern taxation legislation.[2]?Those same pieces of legislation are fundamentally still in place today, but certainly with more additions, adaptations, and revisions than the law makers of the time ever contemplated.
The Current Structure
Currently, when dealing with taxation of MNEs, and taxation issues affecting cross-border financial transactions, we look to the various tax treaties that have been negotiated and agreed upon between sovereign nations, frequently referred to as ‘states’,[3] which provides direction and guidance for which country* has the right to tax certain amounts of varying revenue characterizations.?While one might reasonably expect each treaty to be an entirely unique and bespoke document, many countries have chosen to start with the United Nations Model Double Taxation Convention between Developed and Developing Countries (the “UN Model”), [4] and adapt it to the contracting countries’ (or ‘states’) particularities.[5]
By way of example, the UN Model includes the following sections (abbreviated):
Article 10 – Dividends
1.????Dividends paid by a company which is resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.
2.????However, such dividends may also be taxed in the Contracting State of which the company paying the dividend is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed: …[6]
Article 11 – Interest
1.????Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
2.????However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed …[7]
Article 12 – Royalties
1.????Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in the other State.
2.????However, such royalties may also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the beneficial owner of the royalties is a resident of the other Contracting State, the tax so charged shall not exceed …[8]
In the foregoing, Article 10 deals with the taxation of dividends received by a resident of a Contracting State from sources in the other Contracting State, where “dividends” are defined as including distributions of corporate profits to shareholders.[9]?Similarly, Article 11 and 12 address the taxation rights of interest, and royalties, arising in a Contracting State and paid to, or beneficially owned by, a resident of the other Contracting State, respectively.[10]
However, not all countries that choose to use the UN Model as a foundation for their bilateral tax treaties include these Articles, or other Articles, as written, or at all, as there is no obligation on individual sovereign nations to include or exclude any Article(s) in particular.?As with any contractual negotiation between parties, individual sovereign nations will make their negotiation choices according to their own best interest.[11]
Notwithstanding that the Vienna Convention obligates countries who are a party to the treaty to perform their treaty obligations in good faith,[12] for the most part, without specific implementation by countries who are parties to a treaty, treaty obligations do not automatically become law within a country, or displace the laws already in existence in any country, especially those countries that have a body of common law.[13]
Understanding the Current Structure, with an Example
Currently, for countries that follow the UN Model, an MNE’s profit will typically be primarily subject to taxation in the MNE’s principal country of corporate registration, or, to put it another way, based on the location in which the MNE is primarily headquartered.?This means that the taxation scheme any given MNE is subject to, will be governed by the legislation of that MNE’s home country,[14] as opposed to the country in which the MNE’s profits were generated based on the MNE’s business operations.?By way of illustration, consider an MNE primarily headquartered in the United States of America (“USA”); pursuant to the language in the excerpt from the UN Model above, if “the other Contracting State” is the USA, the MNE will pay tax on dividends, interest, and royalties, in the USA.
MNEs may also find themselves indirectly subject to the taxation scheme in a country in which they are found either to have a Permanent Establishment, or in which they are deemed to be carrying on business, according to domestic law.?The concept of Permanent Establishment does not necessarily depend upon the principal country of registration of an MNE’s main entity, the presence of a local subsidiary[15] or local agents,[16] but on whether the MNE’s business activity is of a level of sufficiency to where the MNE can be said to have a stable and ongoing presence in the country; whether an MNE’s business activity meets this level is not inherently clear, even when consulting the UN Model’s Commentary.[17]?More often than not, on a practical level, the determination of an MNE’s level of business will likely depend on the language in a country’s domestic tax, or other corporate, legislation, and the interpretation of the applicable legislation by the country’s domestic court system if applicable.?In Canada, under the Income Tax Act,[18] a non-resident will be deemed to be carrying on business in Canada if the non-resident (a) produces, grows, mines, creates, manufactures, … anything in Canada … (b) solicits orders or offers anything for sale in Canada …[19]?The list contained in the legislation, however, is not closed or exhaustive, and therefore what is considered to be carrying on business in Canada is also informed by the Canadian common law.[20]?
To elaborate on the earlier illustration with the MNE primarily headquartered in the USA (the “US MNE”), if the US MNE’s activities met the criteria of carrying on business in Canada, the US MNE would likely also be said to have a Permanent Establishment in Canada.?Consequently, pursuant to the language in the excerpt from the UN Model above, if “the Contracting State” is Canada, the MNE will only have limited tax obligations in Canada.
Indeed, in the Canada-U.S. Treaty,[21] Article 11 does not include the second paragraph outlined in the UN Model above.[22]?Therefore, pursuant to the Canada-U.S. Treaty, the taxation rights are limited to “[i]nterest arising in a Contracting State and beneficially owned by a resident of the other Contracting State may be taxed only in that other State.”[23]?The exclusion of the second paragraph results in each country ceding some of their respective taxation rights on interest remitted by MNEs.?Further, Article 12 includes a number of activities from which royalties may “aris[e] in a Contracting State and [be] beneficially owned by a resident of the other Contracting State [which] shall be taxable only in that other State.”[24]?Again, the language results in the ceding by each country to certain rights to taxation of specifically enumerated sources of amounts.?In keeping with the prior example of the US MNE operating in Canada, these modifications to Article 11 and 12 mean that any interest or qualifying royalties garnered by the US MNE in Canada may be taxed only in the USA.
These treaties, having mostly been negotiated before the rise of the online world generally,[25] and certainly before the exponential growth and proliferation of the internet seen in 21st century, were negotiated with a view to tangible goods, and reasonably easily identifiable locations for service provision.?So while countries may have ceded rights to tax certain of amounts, the concessions were made in a world where tax revenues were more easily identifiable from tangible goods and services transactions, and therefore, calculable.
?
The Concern relating to the Current Structure
The concern fundamentally arises based on the persistent awareness that most MNEs’ main entities are corporately registered to a few countries that offer favourible corporate taxation schemes, resulting in the bulk of the revenue and residual profit garnered by the majority of MNEs being remitted to only those few countries; which, the argument follows, leads to an inappropriate or inequitable distribution of capital globally.
To elabourate upon the argument, in short form, the practice of reverting revenue and residual profit arguably results in the progressive and increasing subjugation of those countries’ economies in which the residual profits are generated (the “Subjugated Economy”), due to the continuous capital outflow.?While the Subjugated Economies in which the MNEs operate in the tangible economy do benefit from an increase in tax revenue from sales or other value added tax collected, as well as an increase in jobs and therefore personal income tax collected, if the country has such applicable tax schemes, respectively, the Subjugated Economy is still being deprived, or otherwise starved, of the tax revenue it would garner, were the MNEs paying tax on the amounts of revenue the MNEs generate and revert generally, by virtue of the MNE’s presence in the Subjugated Economy.
It should be noted however, that even though on its face, this deprivation of tax revenue seems as though it must be of some notable magnitude given the amount of residual profits MNEs are hypothesized to be reverting, it would seem not to be so.?While it is true that governments fund their expenditures by way of tax revenue collected from all sources, and that the largest portion of revenue collected for many governments is derived from income tax, a closer look shows the critical source of income tax, at least in the western world where the data is more reasonably reliable, is personal income tax.[26]
Moreover this practice of the MNEs reverting their residual profit to the most favourible taxation jurisdiction is not actually a new issue.?Many MNEs have very complex corporate structures that could only come about had the MNE been working on its tax efficiency since they came to have operations enabling them to do so.[27]?
What has caused the focus to come upon MNEs and their global operations are the newest MNEs whose businesses are entirely facilitated by the internet.?In the increasingly digitized economy, the aforementioned concern reemerges due to the fact that amounts of tax which would have been collectable and collected as sales or value added tax in the normal course of business for tangibles, and personal income tax resultant from the jobs created by the presence of the MNE, are either being moved beyond the reach of many countries’ taxation authorities, or may not exist at all.
For the better part of the 20th century, when the question of determining appropriate taxation for an MNE that either did not have a Permanent Establishment, or was not said to be carrying on business, in a country, tax authorities could look to where the transaction actually, physically took place, or where the underlying contract to the transaction can be said to have been formed.?Canadian courts have previously held that transactions have taken place where the contract is actually formed; specifically, that contracts can be said to have been formed at the place where the contract could be negotiated or otherwise modified.?When the question relates to MNEs, the Canadian courts have held that contracts could be modified where the MNE was corporately headquartered, or where the operating mind was located, and not where the customer or end user chose to engage with the MNE.[28]
However, in the world where transactions increasingly take place online, any person with access to an internet connection in one country can very easily engage with an MNE, regardless of where the MNE is headquartered, and moreover, without ever interacting with any person, resulting in a lack of clarity around the identifiable physical place of the transaction for, among other things, taxation rights.[29]?So while the notion of concern is fundamentally the same as it has ever been, what happens in practice is that there is less of an increase in the flow of capital around the Subjugated Economy due to the reduced sales or value added tax, and more so due to the reduced personal income tax directly related to the jobs people would have had if the MNE had an actual physical presence, and employed people, in the Subjugated Economy.
Worthy of note too, is that consumers of an MNE’s good or service are not actually fungible, largely on the basis that most MNEs are the producers and vendors of consumables, and even more so in the digital economy.?That is, if the MNE is not selling a certain amount of consumables (“Amount X”) to the people a particular country, it is not that the MNE will be able to reallocate Amount X to sell in an alternate country, as the MNE likely already operates in the alternate country in any event.?Summarily, as the alternate country is likely already consuming near its maximum amount of the MNEs consumables, adding Amount X to the consumables available in the alternate country is unlikely to result in additional profits for the MNE.?This is especially true for any service available via the internet, such as video streaming services; an MNE is not able to sell more units of video streaming services in any one country on the basis that is may be selling less in another; to this end, the MNE’s consumers are not fungible.
So, broadly, if the Subjugated Economy did not exist, those portions of the MNEs’ profits derived from its activities in the Subjugated Economy would also not exist.?In accordance with the matching principle typically applied in the normal course of taxation analysis, it is not an unreasonable stretch to say those profits which are derived from the Subjugated Economy ought also to be subject to the taxation authority of the same.
In this way, the argument that the government of the Subjugated Economy, being unable to collect tax revenues from the MNE’s economic activities, especially digital activities, is then less able to fund its own expenditures which, presumably would be on infrastructure or other beneficial ventures for the country’s populace, and which then leads to the continued subjugation of the economy, is understandable.
The OECD’s response: the Pillar One Blueprint
At the outset, it should be noted that Tax Challenges Arising from Digitalization – Report on Pillar One Blueprint (“Pillar One”) was published in 2020,[30] as a part of the OECD’s ongoing Base Erosion and Profit Shifting initiative, and is a prospective document containing a framework of suggestions on how to overcome the aforementioned concerns relating to the profits of MNEs moving beyond the reach of many tax jurisdictions as they have come to be known in the context of the increasingly digitized global economy, [31] and on how to ensure tax revenues are being collected from MNEs whose business profits are primarily derived from providing digital services in countries with which the MNE otherwise has no nexus.??Specifically, the OECD says, “Pillar One is focused on new nexus and profit allocation rules to ensure that, in an increasingly digital age, the allocation of taxing rights with respect to business profits is no longer exclusively circumscribed by reference to physical presence.”[32]?The OECD further says that with the implementation of Pillar One, the allocation of taxing rights will be more efficient, avoid double taxation, provide tax certainty, and be as simple as possible, and that attention will be given to ensuring a level playing field and limiting compliance and administrative burdens.?
Worth remembering however, is that these issues are not new with the digitized economy, only more apparent; previously, persons from one country who frequently travelled to neighbouring countries to purchase goods and services were contributing to conceptually the same issue.?Nevertheless, Pillar One is aimed at addressing taxation based on the nexus between a country and the digital services provided by an MNE in that country.[33]?In the digitized economy, according to Pillar One, the nexus can be found in both Automated Digital Services (“ADS”) and Consumer Facing Businesses (“CFB”); with the rules for determining when and how to tax ADS being similar to sales or other value added tax rules.[34]
Pillar One has three main components to achieve the OECD’s aims:
1.????A new taxing right for market jurisdictions over a share of residual profit calculated at an MNE group (or segment) level (“Amount A”);
2.????A fixed return to certain baseline marketing and distribution activities taking place physically in a market jurisdiction in line with the [arm’s-length principal (“ALP”)] (“Amount B”); and
3.????Processes to improve tax certainty through effective dispute prevention and resolution mechanisms.[35]
To achieve its aims, Pillar One puts forward a detailed restructure of corporate taxation for MNEs, including greater disclosure of consolidated global financial accounting, harmonization adjustments, and inclusiveness of subsidiaries and affiliates in the MNEs’ respective groups and corporate organizations.[36]?Pillar One goes on to suggest that MNEs will follow a detailed restructure in their self-reporting, and will do so to a centralized organization which shall in turn work with countries’ domestic tax administrations to validate the MNE’s self-assessment and report.[37]?However, according to Pillar One, the self-assessment validation is not expected to independently confirm the self-reporting of the MNE, only to identify obvious errors.?
Ultimately, in order for Pillar One to function as designed, individual sovereign nations in which MNEs operate would need to both subscribe to, and implement, the framework in an internationally cooperative fashion, and all with a view to globalization first.
Bigger Picture Issues with Pillar One
While Pillar One is aimed at creating new taxing rights for countries to garner tax revenue relating to activities that would ordinarily be said to fall outside their jurisdictions,[38] the practical implications of such implementation are unlikely to be simple, or low in financial and administrative burden for participating countries, either at the time of initial execution, or in the reasonably foreseeable time frame following such execution in relation to enforcement.?It is important to remember that MNEs are, above all else, entirely self-interested entities with a primary concern of acting in their own / shareholders’ best interests;[39] whether by virtue of their publicly held status and associated duty to shareholders, or by virtue of legislation, MNEs are bound to take whatever actions they can to, ultimately, increase their own profits.[40]?Remembering that the primary source of revenue for many countries is personal income tax, rather than corporate income tax,[41] the likely result, is that the Subjugated Economies will be disproportionately negatively affected by the strategic corporate shifts made by the MNEs in response to a change in countries’ corporate taxation structures as a result of the implementation of initiatives like Pillar One.
The OECD says that Pillar One is not intended to displace or otherwise officiously intrude upon domestic tax infrastructure, but the requirements to properly implement Pillar One would indeed require many countries to make changes to their own tax legislation and administration in favour of the globalized effort.?Indeed, Pillar One may be an overreach of the international community, and has been said to be as much by the business community in the USA.[42]?Moreover, as each country is its own sovereign nation, aims such as requiring the recognition of new taxing rights[43] cannot be unilaterally imposed upon any nation by external, international bodies.?As noted at the outset, domestic tax legislation is foundationally old, and legislation currently in force is largely an evolution of documents created when taxing rights could be easily identified based on physical presence in a jurisdiction; however conceived, modifications to tax legislation are likely not what most people, or even qualified law makers, would refer to as an easy task.
Pillar One applies to in-scope income of an MNE.?The definition of what is in-scope is based on an activity test which is, by its own design, broad and flexible.[44]?The OECD itself notes that what is or would be considered as in-scope is a key political issue.?It should also be noted that not all income of an MNE qualifies as in-scope income,[45] and for the income that is out-of-scope, Pillar One stipulates that a country’s domestic taxation scheme would apply.?The immediately apparent issue is that MNEs are well adept at the characterization of, among other things, sources of income and activities for the purposes of reducing their tax burden, and so, to expect MNEs to do anything other than recharacterize their operations so as to fall primarily out of scope is naive.?As such, without a re-writing of subscribing sovereign nations’ domestic law to negate any benefits to a characterization that would serve to take a MNEs’ activities out-of-scope, MNEs will recharacterize their activities accordingly.??So again, while Pillar One may not be intended to be an over-reach into individual sovereign nations’ tax legislation, the ultimate effect is that it cannot be anything else.
For much of the same reasoning as the characterization issue, the self-reporting structure has many of the same, and now apparent, issues arising from the fact that MNEs are primarily self-interested entities, with a primary responsibility is to maximize profits and shareholder value.[46]?Were Pillar One implemented as suggested by the OECD, based on the very nature of an MNE, MNEs are likely to test and push the boundaries of their reporting obligations, resulting in large administrative and enforcement costs.?Moreover, given the international nature of the Pillar One design, identifying which domestic tax administrative body is going willingly expend the resources to police the MNEs’ self-reporting is unclear.
Pillar One suggests there should be an inter-nation delegation of tax administrative power, and a lead tax administration; but this requires sovereign nations to give up at least some control in assessing their main source of revenue.?While some smaller countries might welcome a country with greater expertise addressing any issues arising, the fact remains that the interests of two sovereign nations, when it comes to the collection of tax revenue, are exceedingly unlikely to be aligned as each county’s ultimate aim, either overtly or covertly, will be to obtain, retain, control, and allocate, the greatest amount of funds it reasonably can justify entitlement to.?For amounts with clear allocations, there is likely to be little to no contest, but for the smaller, or more ‘fringe’ amounts, the answer is unlikely to be so certain; while an individual transaction here and there may not have any perceptible effect, for some countries, the specter of a death by a 1000 cuts would loom.
Even though Pillar One has provisions for certain discrepancies and disputes,[47] there is still an ultimate requirement for a country to give up some of its sovereignty in the course of its deference to the review panel of representative tax administrations.[48]?Moreover, Pillar One also includes provisions which direct MNEs to default to the domestic law of the country in which their main entity is primary registered in any event.[49]?Ultimately, and as it arguably should be amongst freely functioning countries, an MNEs primary country of corporate registration is still the main country that will be the recipient of the majority of revenue from taxation of the MNE.?To that end, without nearly complete agreement by all countries the MNE participates in, the Subjugated Economies are likely to remain in their subjugated status.
Sovereign Nations are Best Suited to Make their Own Choices
Individual sovereign nations can achieve the same aims as those contained Pillar One on the own, either by changes to their respective domestic law, or by way of renegotiation of relevant aspects of their tax treaties with those countries in which the MNEs’ main entities are registered.?Through these actions, and with the implementation an overall domestically cohesive strategy, MNEs’ revenue generating actions can properly be brought within a country’s domestic taxation authority.?Indeed, law makers in some jurisdictions have already begun introducing legislation to bring revenue generating activities of MNEs that are primarily intangible in nature within their respective taxing authorities,[50] either in the form of expanding the application or purview of existing taxes already in place, such as sales tax, or by introducing new categories of tax altogether.[51]
Rather than implement yet another layer to the plethora of domestic tax systems globally, the revision or an addition to specifically address digital services in the UN Model would likely be more effective, and less burdensome overall.?Additionally, domestic law makers or taxation authorities as the case may be, always have the option to expand upon what qualifies as a Permanent Establishment, or carrying on business, for MNEs whose business operations are primarily digital.?While tax authorities and law makers, including many, but not all, Canadian ones have so far declined to so,[52] the law is by no means static, and is capable of evolving to have a new understanding of the ‘place’ of a transaction.?What these actions would mean together with those already being taken, is that the majority of Pillar One would become unnecessary.
It has been pointed out, that while Pillar One has an estimated overall increase in tax revenues collected, the design of Pillar One means those revenues may not be distributed or allocated to the otherwise Subjugated Economies in any event.[53]?However, if, for example, the MNEs were obligated to remit tax revenue in each country in which they operated by way of treaty obligation or domestic law, regardless of whether the tests for Permanent Establishment or carrying on business were met, the likelihood increases that the proportionally appropriate amount of tax revenue would be remitted to the Subjugated Economies rather than being reverted on mass to the MNEs’ primary countries of corporate registration.
Not all countries are going to choose to participate, either in Pillar One, or in treaty (re)negotiation, nor can any sovereign nation be forced to do so; those countries which decline to participate may have their own reasons for such choices.?Treaties and taxation, both together and on their own, are ways in which a country can incent or deter various levels and varieties of economic activity from external sources into their respective countries.?For less developed countries, a multi-national tax framework may not be useful to participate in if the tax revenues are unlikely to be distributed or otherwise allocated proportionately or appropriately.?However, not participating may have a greater chilling effect on MNEs willingness to do business with those countries in any event due to increased compliance obligations with a plethora of different tax schemes, and so, the less developed nations may effectively become trapped subscribing to a framework that does nothing to encourage the own country’s economic growth.?
领英推荐
Conclusion
While Pillar One, like many globalized initiatives, has an ethically agreeable intention, being one of appropriate allocation of tax revenue, the application of Pillar One is unlikely to achieve what the framework is designed to do.
Currently, sovereign nations have the ability to contract with each other by way of treaty to determine the flow of capital for the purposes of taxation and attracting investment.?The risk of implementing Pillar One in its current format, is that MNEs, as ultimately entirely self-interested entities, will make choices that, while commensurate with their own benefit, will result in some countries being excluded from any benefit of the MNEs economic involvement in their economies at all, and probably coupled with the cessation of reasonable access to the MNEs’ goods or services.?While the aims of Pillar One seem to be well intended, the framework goes about implementing those aims in a way that is unlikely to achieve the intended results.?
There is no one-size-fits-all framework for taxation, and while Pillar One is aimed at addressing those issues created by MNEs whose businesses are primarily digital in nature, the most likely outcome is that the disadvantaged economies will continue to be so, but with fewer options for how to incent or deter economic activity in their own respective countries.
[1] J. Li, The Legal Challenges of Creating a Global Tax Regime with the OECD Pillar One Blueprint, February 2021, at p. 2.
[2] Ex. Internal Revenue Code of 1939, 26 U.S.C.A.; Finance Act, 1965 c. 25; Income and Corporation Taxes (No. 2) Act, 1970 c.54; Income (War) Tax Act, R.S.C. 1927, c. 97; Einkommensteuergesetz (1920).
[3] Convention on the Law of Treaties, Vienna, 23 May 1969, as referenced in B.J. Arnold, An introduction to tax treaties.
* the use of ‘country’ and ‘sovereign nation’ (singular and plural) shall be interchangeable throughout as a matter of convenience.
[4] United Nations Model Double Taxation Convention between Developed and Developing Countries 2017 Update, New York: United Nations 2017.
[5] J. Li, The Legal Challenges of Creating a Global Tax Regime with the OECD Pillar One Blueprint, February 2021, at p. 4.
[6] United Nations Model Double Taxation Convention between Developed and Developing Countries 2017 Update, New York: United Nations 2017, Article X.
[7] United Nations Model Double Taxation Convention between Developed and Developing Countries 2017 Update, New York: United Nations 2017, Article XI.
[8] United Nations Model Double Taxation Convention between Developed and Developing Countries 2017 Update, New York: United Nations 2017, Article XII.
[9] United Nations Model Double Taxation Convention between Developed and Developing Countries 2017 Update, New York: United Nations 2017, at p. 257.
[10] United Nations Model Double Taxation Convention between Developed and Developing Countries 2017 Update, New York: United Nations 2017, at p. 279, and at p. 296, respectively.
[11] Agreement Between Canada and the Federation Republic of Germany for the Avoidance of Double Taxation with Respect to Taxes on Income and Certain Other Taxes, and Prevention of Fiscal Evasion and the Assistance in Tax Matters, 1982, S.C. 1980-81-82-83, c. 156.
[12] Convention on the Law of Treaties, Vienna, 23 May 1969, Article 26.
[13] J. Li, The Legal Challenges of Creating a Global Tax Regime with the OECD Pillar One Blueprint, February 2021, at p. 4.
[14] J. Li, The Legal Challenges of Creating a Global Tax Regime with the OECD Pillar One Blueprint, February 2021, at p. 4.
[15] Transfer Pricing Memorandum TPM-08; J. Li, A. Cockfield, and S. Wilkie, International Taxation in Canada, Principles and Practices, 4th Edition (Toronto: LexisNexis Canada), at p. 187.
[16] Knights of Columbus v. Canada, [2008] T.C.J. No. 299; American Income Life Insurance Co. v. Canada, [2008] T.C.J. No. 228; J. Li, A. Cockfield, and S. Wilkie, International Taxation in Canada, Principles and Practices, 4th Edition (Toronto: LexisNexis Canada), at p. 184.
[17] United Nations Model Double Taxation Convention between Developed and Developing Countries 2017 Update, New York: United Nations 2017, Commentary starting at p. 81.
[18] An Act Respecting Income Taxes, RSC 1985, c. 1.
[19] An Act Respecting Income Taxes, RSC 1985, c. 1, s. 253.
[20] Shahmoon v. Minister of National Revenue, [1975] C.T.C. 2361; Fowler v. Canada (Minister of National Revenue), [1990] C.T.C. 2351.
[21] Convention Between Canada and the United State of America With Respect to Taxes on Income and on Capital S.C. 1984, c. 20.
[22] Supra, note 7.
[23] Convention Between Canada and the United State of America With Respect to Taxes on Income and on Capital S.C. 1984, c. 20, Article XI.
[24] Convention Between Canada and the United State of America With Respect to Taxes on Income and on Capital S.C. 1984, c. 20, Article XII.
[25] “A Brief History of the Internet” online:
[26] Ex. “Annual Financial Report of the Government of Canada Fiscal Year 2017-2018”, (19 October 2018), Government of Canada, online:
<https://www.canada.ca/en/department-finance/services/publications/annual-financial-report/2018/report.html>; Matthew Keep, “Tax statistics: an overview”, (15 February 2021), House of Commons Library, online:
“Policy Basics: Where Do Federal Income Tax Revenues Come From?”, (6 August 2020), Centre on Budget and Policy Priorities, online:
“Taxes in Germany”, Tax Foundation, online: <https://taxfoundation.org/country/germany/>.
[27] The Coca-Cola Company & Subsidiaries v. Commissioner of National Revenue, 155 T.C. No. 10.
[28] Knights of Columbus v. Canada, [2008] T.C.J. No. 299; American Income Life Insurance Co. v. Canada, [2008] T.C.J. No. 228.
[29] J. Li, A. Cockfield, and S. Wilkie, International Taxation in Canada, Principles and Practices, 4th Edition (Toronto: LexisNexis Canada), at p. 190-191.
[30] OECD, Tax Challenges Arising from Digitalization – Report on Pillar One Blueprint, OECD/G20 Base Erosion and Profit Shifting Project (OECD 2020).
[31] OECD, Tax Challenges Arising from Digitalization – Report on Pillar One Blueprint, OECD/G20 Base Erosion and Profit Shifting Project (OECD 2020), at p. 8.
[32] OECD, Tax Challenges Arising from Digitalization – Report on Pillar One Blueprint, OECD/G20 Base Erosion and Profit Shifting Project (OECD 2020), at para 3.
[33] OECD, Tax Challenges Arising from Digitalization – Report on Pillar One Blueprint, OECD/G20 Base Erosion and Profit Shifting Project (OECD 2020), at section 3.
[34] J. Li, The Legal Challenges of Creating a Global Tax Regime with the OECD Pillar One Blueprint, February 2021, at p. 6.
[35] OECD, Tax Challenges Arising from Digitalization – Report on Pillar One Blueprint, OECD/G20 Base Erosion and Profit Shifting Project (OECD 2020), at para 7.
[36] J. Li, The Legal Challenges of Creating a Global Tax Regime with the OECD Pillar One Blueprint, February 2021, at p. 6; OECD, Tax Challenges Arising from Digitalization – Report on Pillar One Blueprint, OECD/G20 Base Erosion and Profit Shifting Project (OECD 2020), at section 1.2., generally.
[37] OECD, Tax Challenges Arising from Digitalization – Report on Pillar One Blueprint, OECD/G20 Base Erosion and Profit Shifting Project (OECD 2020), at section 1.2.3.
[38] J. Li, The Legal Challenges of Creating a Global Tax Regime with the OECD Pillar One Blueprint, February 2021, at p. 2.
[39] R.A. Posner, Economic Analysis of Law, 3rd Edition (1986), at p. 394-397.
[40] Ex. Canada Business Corporations Act, R.S.C. 1985, c-44, s. 122(1); Investment Company Act (1940), § 36(b), 15 U.S.C.A. § 80a-35(b).
[41] Supra.
[42] R. Goulder, “A Tax Too Far: Pillar 1, We Hardly Knew You” (14 January 2020), Forbs, online:
[43] J. Li, The Legal Challenges of Creating a Global Tax Regime with the OECD Pillar One Blueprint, February 2021, at p. 2-3.
[44] OECD, Tax Challenges Arising from Digitalization – Report on Pillar One Blueprint, OECD/G20 Base Erosion and Profit Shifting Project (OECD 2020), at section 2, generally.
[45] OECD, Tax Challenges Arising from Digitalization – Report on Pillar One Blueprint, OECD/G20 Base Erosion and Profit Shifting Project (OECD 2020), at, inter alia, paras 35-37, and 44-45 for ADS.
[46] Ex. Canada Business Corporations Act, R.S.C. 1985, c-44, s. 122(1); Investment Company Act (1940), § 36(b), 15 U.S.C.A. § 80a-35(b).
[47] OECD, Tax Challenges Arising from Digitalization – Report on Pillar One Blueprint, OECD/G20 Base Erosion and Profit Shifting Project (OECD 2020), at paras 394-399.
[48] OECD, Tax Challenges Arising from Digitalization – Report on Pillar One Blueprint, OECD/G20 Base Erosion and Profit Shifting Project (OECD 2020), at para 394, and section 9, generally.
[49] J. Li, The Legal Challenges of Creating a Global Tax Regime with the OECD Pillar One Blueprint, February 2021, at p. 9.
[50] Hodgson Ross LLP, “Florida Finally Enacts Sales Tax Economic Nexus Legislation” (1 May 2021), WLNR 14082105.
[51] Steve Faguy, “Quebec budget: Netflix must begin charging QST in 2019” (29 March 2018), Montreal Gazette, online: <https://montrealgazette.com/news/quebec-budget-netflix-must-apply-qst-in-2019>; Andrew Maslaris, “France’s Digital Services Tax” (9 August 2019), Parliament of Australia, online: <https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/FlagPost/2019/August/Digital_Services_Taxation>.
[52] J. Li, A. Cockfield, and S. Wilkie, International Taxation in Canada, Principles and Practices, 4th Edition (Toronto: LexisNexis Canada), at p. 190-191.
[53] J. Li, The Legal Challenges of Creating a Global Tax Regime with the OECD Pillar One Blueprint, February 2021, at p. 14.