The adoption of income taxation at the federal level in 1917 charted a course for Canada’s development, both internally and as a force in the world. Today, the income tax system is under pressure from technological and financial globalization and innovation, which have altered the government’s fiscal grip on transnational transactions and companies. Yet a look back at Canada’s experience with income taxation demonstrates that globalization and innovation have always created both challenge and opportunity for the country.

Canada’s reputation as a stable member of the international community of states, its long-term relationships with key trading nations and regions, and its membership in the key global networks, especially the G7, Group of Twenty and the Organisation for Economic Co-operation and Development (OECD), have helped the nation become an important contributor to the development of international consensus on the key components of income taxation. As the global economy has become increasingly interconnected through the rise and dominance of transnational corporations, Canada has both shaped and been shaped by this international involvement.

Canada is currently poised to be a key participant in an overhaul of the international tax system that is being spearheaded by the OECD. This overhaul is evolving into a more globally inclusive venture that is sure to be reconfigured, reimagined and reiterated in the coming years. A major impetus for the overhaul, known to tax professionals as the “Base Erosion and Profit Shifting” initiative (or by its now-ubiquitous acronym, BEPS), is an illustration that across the world, the income tax is faltering in its essential purpose, that of enabling nations to raise revenues in a fair and effective way. The idea of identifying and eliminating BEPS arose following rising popular perception that governments are no longer obligating transnational corporations to pay their fair share of income taxation. This narrative has been fed through media dissemination of events, such as the Lux Leaks and Panama Papers disclosures, as well as stories on the tax affairs of specific companies that sell popular consumer products and services. An increasingly agitated public has responded to the news with calls for corporate accountability to the broader public, public sanction of companies accused of “tax dodging,” and legislative reforms designed to crack down on tax planning by major transnational firms.

The more turbulent the external environment becomes, the more tenuous the balance also becomes. Mediating these often-conflicting goals has been a constant theme in Canada’s experience with income taxation over the past century.  This experience positions the nation to be a thought-leader and voice of reason in international debate regarding the taxation of transnational corporations going forward.

Part of Series

Marking 150 years since Confederation provides an opportunity for Canadian international law practitioners and scholars to reflect on Canada’s past, present and future in international law and governance. This series of essays, written in the official language chosen by the authors, that provides a critical perspective on Canada’s past and present in international law, surveys the challenges that lie before us and offers renewed focus for Canada’s pursuit of global justice and the rule of law.
The project leaders were Oonagh E. Fitzgerald, director of the International Law Research Program at the Centre for International Governance Innovation (CIGI); Valerie Hughes, CIGI senior fellow, adjunct assistant professor of law at Queen’s University and former director at the World Trade Organization; and Mark Jewett, CIGI senior fellow, counsel to the law firm Bennett Jones, and former general counsel and corporate secretary of the Bank of Canada. The series was published as a book titled Reflections on Canada’s Past, Present and Future in International Law/Réflexions sur le passé, le présent et l’avenir du Canada en matière de droit international in spring 2018.

  • Allison Christians is the H. Heward Stikeman Chair in the Law of Taxation at McGill University's Faculty of Law, where she teaches and writes on national, comparative and international tax law and policy.