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U.S. siphons Canadian taxes
Year Published: 1992Resource Type: Article Cx Number: CX4446 Abstract: The U.S. government is pressuring American multinational corporations to implement accounting measures which will result in them paying substantially less tax to foreign governments, and more tax in the U.S. According to Lorraine Eden, an economist at Carleton University, the U.S. Internal Revenue Service is engaged in a campaign to have multinationals attribute more of their expenses to Canadian and other foreign subsidiaries. Such a shift results in fewer taxes being payable in Canada, and more taxes being payable in the U.S., where the profit is declared. Such shifts are easy for multinationals to implement, since typically 70 per cent of their trade is within their own firms. By making paper changes in the prices it charges itself for goods and services, a corporation can substantially alter its profitability picture. Canada is particularly affected by such changes, because Canada has the highest rate of foreign ownership in the world, most of it U.S. ownership. With free trade, corporations now no longer have to take tariff barriers into account in making such decisions. According to Eden, the Internal Revenue Service has an army of experts working with multinationals to change their internal pricing practices to make their practices more beneficial to the U.S. and less beneficial to Canada. Revenue Canada, in contrast, has nothing in place to counteract the U.S. campaign. |