Canadian government officials signed an agreement this week to modify Canada’s tax treaties to implement the measures developed by the joint Organisation for Economic Co-operation and Development (OECD) to counter base erosion and profit shifting.
The agreement, the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, is the culmination of several years of collaborative work by OECD and G20 countries to combat international tax avoidance.
Base erosion and profit shifting (BEPS) refers to aggressive tax planning arrangements undertaken by multinational enterprises which, though legal, exploit the interaction between domestic and international tax rules to inappropriately reduce their taxes. For example, some enterprises will shift their taxable profits away from the jurisdiction where the underlying economic activity has taken place to avoid paying their fair share.
The Multilateral Convention supports the Government of Canada’s commitment in Budgets 2016 and 2017 to enhance tax fairness and combat international tax avoidance. It is also consistent with commitments made by Canada and other OECD and G20 members to implement tax treaty-related BEPS measures, recognizing that widespread and consistent implementation of these measures is critical to the effectiveness of the BEPS project.
“The Government of Canada continues to stand up for middle class families and all Canadians by ensuring a more fair tax system and combatting international tax avoidance,” Ginette Petitpas Taylor, parliamentary secretary to the Minister of Finance, who signed the agreement along with other government officials, said. “As an early signatory to this international agreement today, Canada is at the forefront of global action to improve international tax rules, and work towards a more fair and transparent tax system.”