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Canada's Prime Minister Justin Trudeau arrives at a news conference in Ottawa, Ontario, Canada, December 12, 2016.
Digital services tax brawl?
Last week, the Trudeau government enacted a digital services tax that has been in the works for years — and the US is ready to retaliate. The tax promises big money for the feds, with billions in revenue expected from big tech companies that earn more than CA$1.1 billion a year.
Canada had hoped to convince its peer countries in the OECD to follow suit on the same timeline — what Finance Minister ChrystiaFreeland called the “multilateral solution” — but that hasn’t happened. At least not yet.
The US, which wants to wait on imposing any such tax, is threatening to respond to the policy. The country’s ambassador to Canada, David Cohen, labeled the tax “discriminatory,” and trade representative Katherine Tai is looking at options in response, which might include action under the US-Mexico-Canada Free Trade Agreement.
Canada is already staring down a 2026 USMCA review, which could prove a rocky undertaking if Donald Trump wins in November. The former president has promised a global import tariff if he’s returned to the White House, which may or may not apply to Canada. The Trump campaign hasn’t clarified the scope of the policy. In March, Tai warned Canada not to get “too comfortable” with the free-trade status quo, which might be heading for upheaval, potentially alongside some punishment for Canada’s unilateral digital services tax.
Graphic Truth: Infant mortality in the OECD
American parents are more than four times as likely as their peers in Estonia to lose a baby during or shortly after birth. It is one of the most devastating human experiences – and a key indicator of a country’s development. After all, if even the most vulnerable babies survive, the healthcare system must be doing something right. By that metric, the US looks more like Chile or Slovakia than the global superpower it is.
And it’s not just babies who are more at risk in the US. A study from the Commonwealth Foundation found that American mothers are twice as likely to die during or shortly after childbirth than their Canadian peers, and more than 10 times as likely as women in New Zealand.
Part of the problem comes down to a shortage of care for expectant mothers. The US has about 15 gynecologists per 1,000 live births, compared to 54 in the UK and 78 in Sweden. That means less attentive care during and after pregnancy, which can lead to early warnings going overlooked.
Graphic Truth: From baby boom to baby gloom
Women are having fewer children in the US and Canada, where birth rates have been falling since the 1960s. In 2020, Canada’s fertility rate hit an all-time low of 1.4 children per woman. In the US, the national birth rate has fallen by 20% since 2007.
The baby bust is not unique to Canada and the US; the decline is unfolding across the OECD, as women gain increased access to contraception, higher education, and careers, all of which tend to lead to delayed family planning.
High inflation in recent years isn’t helping matters. After all, kids are expensive – from housing to education to health care – which may be enough to deter some couples.
But there is one OECD country where this isn’t the case: Israel. Israeli women have an average of 3.1 children, making Israel the only OECD country where the birth rate is above the replacement level. Experts attribute this to the influence of religion and tradition in the country, as well as social and economic policies that encourage work-family balance.59.5 billion: US oil major Exxon Mobil on Wednesday paid $59.5 billion to acquire Pioneer Natural Resources, a major producer of shale oil in West Texas.
Hard Numbers: Exxon bets on shale, Netflix makes an unchill choice, Google floods the zone, digital tax plans advance
25: Netflix is planning to raise subscription prices again, starting with the US and Canada, as soon as the ongoing US actors strike ends. The precise cost increase isn’t known yet, but it comes after Netflix and other ad-free streamers have already raised their fees by 25% over the past year.
800: Is a flood on the way? As the weather gets more and more extreme, the answer is, increasingly, yes — but where and when? Google Maps has an answer for that: a new prediction service called Flood Hub. In the US and Canada, it will cover 800 river areas inhabited by some 12 million people.
32 billion: The OECD this week released a new draft treaty on global digital taxation that could raise as much as $32 billion annually by enabling governments to tax tech companies in the countries where they operate, rather than just where they are headquartered. It’s unclear whether it will be ratified by enough countries’ legislatures to take effect — but Canada is charging ahead unilaterally with its own digital tax, despite threats from US lawmakers.OECD logo seen on a smartphone and a computer screen.
Canada flies solo on digital services tax
‘Tis the summer for Trudeau vs. Big Tech. You’ll recall that Ottawa plans to make tech giants pay for linking to Canadian news and that the tech firms, in turn, have begun blocking access to news from the country’s outlets on their platforms.
Now, Canada is pressing ahead with a 3% digital services tax on big tech companies. The Liberals plan for the tax to come into effect on January 1, 2024 – after introducing the measure in the 2021 budget and delaying it by a year. The tax is part of an OECD plan to guarantee a 3% tax across jurisdictions that would discourage tech companies from setting up shop in one country over another to avoid paying taxes. It would also mean tech firms couldn’t bully countries into lowering taxes by threatening to leave for somewhere cheaper. But most of the 140+ countries involved, including the US, are not prepared to launch the measure. At least not yet.
There’s lagging support for it in the US Congress, and with Biden facing reelection, ratification of the tax could be politically costly. Washington has asked the OECD to delay implementation, and the organization has pushed the adoption of this measure to 2024. But Canada says it’s not going to wait. Washington is pushing Ottawa to relent, and both the US and Canadian business communities are warning of the risks of a unilateral move, such as trade retaliation from the US and, potentially, other countries – not to mention threats from tech companies themselves.
But Canadian Finance Minister Chyrstia Freeland, unmoved by the warnings, says the tax is in the national interest and that “Canada’s position is unchanged.” Question is, can the US or OECD get her to change her mind before winter?Freed Houthi prisoners stand as they wait to board an International Committee of the Red Cross (ICRC)-chartered plane at Aden Airport, in Aden, Yemen.
Hard Numbers: Yemen prisoner swap, North Korea’s new missile, Germany ditches Russian imports, gender parity in Kiwi cabinet, Juice headed to Jupiter
900: In the biggest prisoner exchange in Yemen since 2020, 900 prisoners are expected to be swapped in the days ahead as part of ongoing talks between Houthi rebels, backed by Iran, and the Saudi-backed government. The confidence-building measure comes amid rising hopes that Yemen's brutal eight-year war might soon come to an end.
1,000: North Korea launched its first intercontinental ballistic missile test in a month, with some reporting that Pyongyang tested an advanced, harder-to-detect missile for the first time. Following a 1,000-kilometer flight (620 miles), the missile landed in waters between the Korean Peninsula and Japan. Japanese authorities on the northern island of Hokkaido urged residents to seek shelter.
91: German imports of Russian goods dropped by 91% during the first year of Russia’s war in Ukraine. Moscow had previously been the country’s 11th-biggest source of imports, but as a result of Western sanctions has since dropped to … 46th place.
10: Jacinda Ardern may have bowed out, but women leaders are getting ahead in New Zealand. For the first time, the country has gender parity in the cabinet. Thanks to a reshuffle by PM Chris Hipkins, there are now 10 women and 10 men in his cabinet.
8: Citing poor weather conditions, the European Space Agency has delayed the launch of a satellite to the planet Jupiter, an ambitious mission that will take eight years. The Jupiter Icy Moons Explorer project, dubbed Juice, aims to explore whether the fifth planet's major moons hold deep bodies of water. The agency will try again in the coming days.
Supporters of opposition party KMT wearing t-shirts with the Taiwan flag at an election rally in Taoyuan.
What We’re Watching: Taiwanese election, Trump's taxes, South African protests, ugly economic forecast
As Taiwan votes, China watches
Taiwanese go to the polls Saturday to vote in the first election since early 2020, when President Tsai Ing-wen won a second term in office right before COVID erupted. This time it’s only a local election, but as with anything political in Taiwan, China is paying close attention. Beijing is bullish on the pro-China KMT party, which is leading the polls in several key races. (Fun fact: the KMT mayoral candidate for the capital, Taipei, is the great-grandson of Generalissimo Chiang Kai-shek, the founder of modern Taiwan.) A good overall result for the KMT would mean two things. First, it would buck historical trends — and China's declining popularity among Taiwanese — if voters sour on the ruling anti-China DPP party just months after China responded with its biggest-ever show of military force to US House Speaker Nancy Pelosi visiting the island. Second, it raises the stakes for the DPP ahead of the presidential election in 2024, when the popular but term-limited Tsai needs a strong candidate for the party to stay in power. Alternatively, if polls are wrong and the DPP does well, expect fire and fury from across the Taiwan Strait.
Trump's tax returns
A long legal battle over Donald Trump’s tax returns has ended. The US Supreme Court on Tuesday upheld an appeals court ruling granting the House Ways and Means Committee access to No. 45’s documents. The Treasury Department is now expected, soon, to give the House committee six years’ worth of Trump's tax documentation. Democratic Rep. Richard Neal of Massachusetts, a committee member, said he and his colleagues will “now conduct the oversight that we’ve sought for the last three and a half years.” Democrats, of course, have been trying to get at Trump’s tax returns in one way or another for much longer than that -- it was back in 2016 when, in a break with tradition, then-candidate Trump refused to publicize them. Still, it might not be all joy for the Dems now. If the Treasury Department doesn't release the documents before Republicans take control of Congress in January, the incoming GOP-run Ways and Means Committee will almost certainly withdraw the congressional request. In that case, Trump's tax returns would remain a secret, despite the high court's ruling.
Anger in South Africa
In South Africa, thousands of public-sector workers have launched a nationwide strike for higher wages in a time of high inflation. The political timing is awkward for President Cyril Ramaphosa. He will seek reelection as leader of the governing party, the African National Congress, next month, and he will try to pack the party leadership with his allies. Supporters of the main rival group within the ANC, the radical economic transformation faction, are spoiling for a fight, and supporters of Ramaphosa’s best-known ANC rival, former President Jacob Zuma, are angry this week because a South African court ruled on Monday that Zuma must return to prison for failure to cooperate with a corruption investigation. (Apparently, none of Ramaphosa’s ANC rivals is impressed that Ramaphosa is in the UK and met King Charles this week.) South Africa’s president will win most of these battles, and he still looks likely to lead the ANC to victory in the 2024 national elections, but the factionalization of the party will remain a chronic problem for the president – and for the nation he leads.
A rough global economic forecast
Those who aren’t economists may assume that if the world can just get through the current spike in inflation, can finally put COVID fully behind us, and can reach a point where the war in Ukraine begins to cool, economic life will return to something like normal. Economists, however, are warning that 2023 is likely to be an ugly year. The Organization for Economic Cooperation and Development forecast on Tuesday that global economic growth will drop to a weak 3.1% for this year to just 2.2% for next year. (That’s down from 5.9% in 2021.) Inflation, according to the OECD’s secretary-general, is now “broad-based and persistent.” The political implications for this problem in the coming year will be felt everywhere. With lasting higher prices for food and fuel in particular, more developing countries, faced with the risk of social unrest, will need financial help, and fewer wealthy countries will have the spare cash and political willingness to help them. In short, 2023 will likely be a bad year to be an incumbent in every region of the world.This comes to you from the Signal newsletter team of GZERO Media. Sign up today.
How will the global corporate tax deal impact tech companies?
Marietje Schaake, International Policy Director at Stanford's Cyber Policy Center, Eurasia Group senior advisor and former MEP, discusses trends in big tech, privacy protection and cyberspace:
Will the OECD-brokered global corporate tax deal make a difference?
Well, it should, at least in two years, once it is adopted by the 136 countries that have now agreed to it. Once enforced, a minimum contribution would see approximately $125 billion flowing to public purses where it doesn't today. It would make it harder for countries to be tax havens or to be part of this race to the bottom when it comes to tax rates. It puts a limit on competition between countries but that is still possible. Now, public scrutiny over the corporate sector has intensified over the past years and with a whole host of issues like health care, climate change, and infrastructure begging for better solutions, there is a need for fair taxation that is widely supported, both publicly and now also politically.
Will tech companies finally start paying their fair share?
Well, they would be part of this treaty once it is in place, but in the meantime, there is actually a two-year ban on tax levies. The US negotiated that because if you recall, there were French proposals to tax US tech giants over their European income and profits and those almost led to a trade war between the two allies. So, most likely this OECD tax treaty will go over much more smoothly. Already, the historic agreement by the OECD and G20 countries is a much-needed sign of hope.