e -Brief

More specifically, the policy rationale of the UTPR is to serve as a backstop to the IIR, in the sense of allowing subsidiary jurisdictions to impose the Top-up Tax to the extent that parent jurisdictions fail to impose it under an IIR. [...] However, because of Canada’s disproportionate exposure to the US economy relative to other countries, the exercise becomes more complicated, to the extent that our approach will have to strive toward optimality in light of both the Model Rules and the US GILTI regime, which may or may not be modified to become consistent in certain contexts over the years.18 In addition, while the US GILTI regime. [...] It should also be noted that the Biden administration has proposed (in its March 28, 2022 “Greenbook”) further modifications to US tax rules to implement Pillar Two, such as an increase to the rate for GILTI, the adoption of a QDMTT and a UTPR, and the repeal of the existing Base Erosion and Anti-Abuse Tax (“BEAT”), among other changes. [...] The current regime is compared to the Pillar Two regime and a “Canada First” regime in which Canada reduces its rate on foreign earnings to the Minimum Rate of 15 percent so that the Canadian-based MNE group organizes its affairs to pay tax at the Minimum Rate in Canada. [...] Canada will need to consider very carefully how to restructure and optimize various elements of our tax and fiscal policy in order to maximize the attractiveness of Canada for all MNE groups as a location for activities and investment, as well as to create a climate in which Canadian MNE groups have the incentive to maximize the repatriation of their foreign earnings.